United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Abstract

A cyclical decline in sugar production is shifting India, the world’s second largest 

producer, from net exporter to net importer during 2009/10 (October/September) and 

contributing to the current runup in global sugar prices. The downturn in production 

is primarily due to a policy-induced cycle that has become increasingly pronounced. 

India is forecast to shift from net sugar exports of 5.8 million tons in 2007/08 to net 

imports of 2.8 million tons in 2008/09 and a record 6.0 million tons in 2009/10. Sugar 

production is poised to rebound in 2010/11, as higher government price supports and 

open-market prices are likely to stimulate plantings and improve incentives to deliver 

sugarcane to sugar mills. In the longer term, India has the capacity to boost sugarcane 

output, and the government and the sugar industry are considering policy measures to 

moderate the increasingly sharp cycles in sugar production and trade. 

Keywords: India, sugarcane, sugar, policy, supply, demand, trade, production cycles.

Acknowledgments

The author thanks Robert Knapp and Dr. Santosh K. Singh of USDA’s Foreign Agricultural Service and Amani Elobeid of Iowa State University for their very helpful 

review comments, and John Weber and Wynnice Pointer-Napper of USDA’s Economic 

Research Service for editing and designing this report.

Maurice R. Landes, mlandes@ers.usda.gov

Indian Sugar Sector Cycles 

Down, Poised To Rebound

SSS-M-260-01

April 2010

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction . . . . . . . . . . . . . . 2

Recent Supply and Demand

 Developments. . . . . . . . . . . 3

Policies Drive Sugarcane 

 Production Cycles . . . . . . . 5

Sugar Demand Trends. . . . . . 9

Sugar Trade . . . . . . . . . . . . . 11

Sugarcane Production 

 Potential . . . . . . . . . . . . . . 13

Sugarcane and Sugar Output 

 Poised for Rebound . . . . . 16

References. . . . . . . . . . . . . . . 18

Appendix. . . . . . . . . . . . . . . . 19
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A cyclical decline in sugar production is shifting India, the world’s second 

largest producer, from net exporter to net importer during 2009/10 (October/

September) and contributing to the current runup in global sugar prices. The 

downturn in Indian production is primarily due to a policy-induced cycle 

that has become increasingly pronounced. Large domestic surpluses during 

2006/07 and 2007/08 led to lower domestic sugar prices, weakened incentives for sugarcane growers, and sharply reduced plantings for the 2008/09 

and 2009/10 crops. Indian domestic sugar prices have now increased 

sharply since early 2009 because of reduced supplies—and despite large 

government releases of sugar and liquidation of government-owned buffer 

stocks. India is forecast to shift from net sugar exports of 5.8 million tons 

in 2007/08 to net imports of 2.8 million tons in 2008/09 and a record 6.0 

million tons in 2009/10.

Indian sugarcane and sugar production are poised to rebound in 2010/11. A 

combination of higher government price supports and open-market prices will 

likely stimulate plantings and also improve incentives to deliver sugarcane 

to sugar mills rather than to alternate uses. In the longer term, India has the 

capacity to boost both area and yields of sugarcane, and the government and 

the sugar industry are engaged in an ongoing dialogue on policy measures to 

moderate the increasingly sharp cycles in sugar production and trade. 

Introduction
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Indian sugarcane and sugar production are historically cyclical, and the cycle 

appears to have become increasingly pronounced in the 2000s (fi g. 1; app. 

table 1). After soaring to 30.8 million tons in 2006/07—39 percent above the 

previous record set in 2002/03—sugar production dropped to an estimated 

16.1 million tons in 2008/09 and is forecast at 17.3 million tons in the current 

2009/10 year. All of India’s sugar is produced from sugarcane, and the 

swings in production have been driven primarily by similarly large swings in 

harvested area of sugarcane (fi g. 2). Estimated area of 4.25 million hectares1

in 2009/10 is about 17 percent below the record amount in 2006/07. Although 

more than 90 percent of sugarcane area in India is irrigated,2 yields are 

affected by the share of area that is relatively high-yielding fi rst-year growth3

and, to a lesser extent, by variation in rainfall. Relatively small shares of 

fi rst-year growth in 2008/09 and 2009/10, as well as below-normal monsoon 

rainfall in 2009, likely contributed to reduced average sugarcane yields in 

2008/09 and estimated yields for 2009/10.

In contrast to the volatility of production, Indian sugar consumption has 

continued to expand relatively steadily due to rising per capita incomes 

and government interventions to adjust stocks, facilitate trade, and assure 

adequate monthly availability (see fi g. 1). Despite the sharp drop in sugar 

production in 2008/9 and continued low output in 2009/10, sugar consumption has remained relatively stable and on trend due to monthly releases of 

“free-sale” sugar into the open market and allocations of subsidized “levy” 

sugar. However, despite net imports of 2.8 million tons in 2008/09 and an 

anticipated 6.0 million tons in 2009/10, Indian sugar stocks are forecast to 

fall to 3.5 million tons by October 2010, the lowest level since 1993/94. 

Domestic open-market prices of sugar and gur,4 the primary substitute sweetener, remain under pressure. For the 2008/09 marketing year, wholesale sugar 

prices averaged 43 percent higher in real terms than prices a year earlier, 

while gur prices averaged 53 percent higher (fi g. 3).

1One hectare equals 2.47 acres.

2The share of sugarcane area that was 

irrigated averaged 91 percent during 

2003/04-2005/06, the most recent years 

for which data are available. During 

1996/97-2005/06, the most recent 10 

years for which data are available, the 

share of sugarcane area irrigated ranged 

from a low of 88 percent in 1995/96 to 

a high of 92.5 percent in 2005/06.

3Each planted hectare of sugarcane 

is typically maintained for three annual 

harvests: a relatively high-yielding fi rst 

crop about 10 months after planting, 

followed by two lower yielding annual 

volunteer, or “ratoon,” crops.

4Gur, or jaggery, is unrefi ned brown 

lump sugar made from sugarcane by 

farmers and unregulated, small-scale 

enterprises. It is a preferred sweetener 

for many rural consumers and is also 

used to produce illicit liquor.

Recent Supply and Demand Developments

Figure 1

Supply and use of centrifugal sugar in India 

(October/September marketing years)

Million tons

Source: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online.

Cane sugar production

Total imports

Total exports

Total domestic use

Ending stocks

0

5

10

15

20

25

30

35

1959/60 69/70 79/80 89/90 99/2000 09/10
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Figure 2

Sugarcane area and production in India

Million hectares

Sources: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online; and Government of India, Ministry of Agriculture, Directorate 

of Economics and Statistics.

Million tons

1959/60 69/70 79/80 89/90 99/2000 09/10

0

1

2

3

4

5

6

0

50

100

150

200

250

300

350

400

Sugarcane area

Sugarcane production (right axis)

Figure 3

Real wholesale prices of sugar and gur in India

1993/94 rupees per ton

Sugar

Gur

Source: USDA, Economic Research Service using data from Government of India, 

Ministry of Commerce and Industry, Office of the Economic Adviser.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1993/94 95/96 97/98 99/2000 01/02 03/04 05/06 07/08
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India’s sugar area and production cycles are driven largely by policy interventions, including sugarcane support price policies set by the central and 

state governments as well as sugar storage and trade policies set by the 

central government. Biological factors also play a role: sugarcane remains in 

the fi eld for 3 years once it is planted, and area and production adjust downward slowly as price incentives fall, thus prolonging periods of oversupply, 

weak market prices, and fi nancial distress for sugar mills. The key policy 

interventions are:

• Central and state government price support policies for sugarcane.

• Central government regulation of releases of levy and free-sale sugar and 

buffer stocks.

• Central government regulation of sugar trade.

• Other domestic marketing restrictions (e.g., private storage limits).

Central and state government price support policies for sugarcane. Under 

the system in place through the 2008/09 marketing year, the Commission 

on Agricultural Costs and Prices (CACP) under the Ministry of Agriculture 

recommended annual Statutory Minimum Prices (SMP) based primarily 

on estimated costs of production. State governments in some of the major 

producing states then set higher State Advised Prices (SAP) that mills in 

the state are required to pay sugarcane growers. The substantially higher 

SAPs set by some state governments account for regional variations in the 

productivity and profi tability of sugarcane, as well as pressures from local 

sugarcane growers.5 The central government fi nanced the cost of supporting 

the SMP, but sugar mills were required to pay the difference between the 

SMP and the higher SAPs and incur any resulting fi nancial losses. Beginning in 2009/10, the CACP will set Fair and Remunerative Prices (FRP) for 

sugarcane that, according to the new regulation, will also include “reasonable 

margins for growers of sugarcane on account of risk and profi ts.”6 With the 

new FRP system, the sugar mills gain some relief because more of the cost of 

supporting the current SAPs is shifted from the mills to the central government.7 The future impact of the FRP system is unclear, however, and it is 

possible that it will encourage states to set even higher SAPs that are further 

removed from market conditions. 

Data reveal a strong but lagged relationship between changes in the SAPs 

for sugarcane and changes in area harvested (fi g. 4). Drops in area harvested 

in 2003/04 and 2004/05 were preceded by declines in real SAPs, and higher 

SAPs in 2004/05 and 2005/06 corresponded with increased area in 2005/06 

and 2006/07. Most recently, the drop in area in 2008/09 was preceded by 

sharply lower real SAPs in 2007/08. The fall in sugarcane area in 2008/09 

was likely also infl uenced by the unusually large increases in Minimum 

Support Prices (MSPs) for wheat and rice, which compete with sugarcane 

for irrigated land, in 2006/07 and 2007/08 (fi g. 5). Unlike the SMPs for 

sugarcane, the MSPs set by the central government for wheat and rice are 

5In southern states, average sugarcane yields are higher, and average 

costs of production are lower, than in 

northern states.

6Government of India, Ministry of 

Consumer Affairs, Food, and Public 

Distribution, Department of Food 

and Public Distribution. Order S.O. 

2665(E)/EssCom./Sugarcane, New 

Delhi, October 22, 2009. http://fcamin.

nic.in/sugar/spf0001.pdf

7When the change in sugar support 

price policy was fi rst announced in 

October 2009, the state governments, 

rather than sugar mills, were required 

to pay the difference between the new 

FRPs and the SAPs. With this shift in 

the fi nancial burden, the major producing state of Uttar Pradesh announced 

a new SAP (Rs165/100kgs) that was 

below existing market prices, leading 

to political agitation by growers. In 

December 2009, the central government agreed to again make the sugar 

mills responsible for paying the difference between the FRP and the SAPs. 

Uttar Pradesh then raised the SAP 

to Rs190/100kgs, with farmers still 

demanding that it be raised further to 

Rs205/100kgs.

Policies Drive Sugarcane Production 

 Cycles
6

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good indicators of prices received by growers because a large share of the 

marketed surplus of wheat and rice is purchased at the MSPs.

The SAP policy also affects the volatility of sugarcane area when it imposes 

fi nancial losses on sugar mills that prevent them from honoring the SAP. 

During periods of surplus, SAPs can continue to rise without any specifi c 

link to sugar market conditions. These price hikes catch the mills between the 

fi xed SAPs they are required to pay and weakening market prices they receive 

for their refi ned sugar. The resulting fi nancial losses lead to deferral or default 

by mills on payments to growers that undermine incentives and contribute to 

volatility in sugarcane planting and production. Most recently, during 2006/07 

and 2007/08, the large fi nancial arrears to growers on the part of mills in 

major producing states reportedly led to both increased diversion of sugarcane 

from mills to production of khandsari8 and gur, and reduced planting of new 

8Khandsari is centrifugal sugar 

produced by small-scale, unregulated 

fi rms. Production is declining, and 

khandsari now accounts for about 3 

percent of total sugarcane use.

Figure 4

Sugarcane area, real Statutory Minimum Price (SMP), 

and average State Advised Price (SAP)

1993/94 rupees per 100 kgs

Sources: USDA, Economic Research Service using data from Government of India, 

Ministry of Agriculture, Directorate of Economics and Statistics; and USDA, 

Foreign Agricultural Service, Attache Reports.

1,000 hectares

1988/89 91/92 94/95 97/98 2000/01 03/04 06/07 09/10

0

10

20

30

40

50

60

70

0

1,000

2,000

3,000

4,000

5,000

6,000

Avg. sugarcane SAP

Sugarcane SMP

Sugarcane area (right axis)

Figure 5

Real State Advised Prices (SAP) and Statutory Minimum Prices for 

sugarcane and Minimum Support Prices (MSP) for paddy and wheat

1993/94 rupees per 100 kgs

Sources: USDA, Economic Research Service using data from Government of India, 

Ministry of Agriculture and Cooperation, Directorate of Economics and Statistics; 

and USDA, Foreign Agricultural Service, Attache Reports.

1993/94 rupees per 100 kgs

1988/89 91/92 94/95 97/98 2000/01 03/04 06/07

0

10

20

30

40

50

60

70

0

50

100

150

200

250

300

350

400

450

500

Avg. sugarcane SAP Sugarcane SMP

Paddy MSP (right axis) Wheat MSP (right axis)
7

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sugarcane area in 2008/09.9 With higher open-market sugar prices in 2009, as 

well as central and state government measures to assist the mills, the fi nancial health of the mills has been largely restored and is not expected to affect 

processing or grower payments for the 2009/10 sugarcane crop.

Government regulated releases of levy, free-sale, and buffer stock sugar. The 

central government regulates all releases of refi ned centrifugal mill sugar 

into the market by sugar mills. Marketing of khandsari and gur, which are 

produced by farmers and small-scale enterprises, is unregulated. Mills are 

now required to sell 10 percent of their production at a fi xed, below-market 

levy price to the Public Distribution System for sale to consumers determined to have incomes below the poverty line. The remaining 90 percent 

of mill production is sold at market prices, but the amounts that can be sold 

are determined by quarterly quotas set by the central government. Finally, 

buffer stocks accumulated by the government during periods of surplus are 

later released for open-market sale based on monthly quotas. A 5-millionton buffer stock accumulated following record output during the 2006/07 

marketing year was released during 2007/08 and 2008/09 to augment government supplies of levy and free-sale sugar. 

Since 2000, the regulated releases of sugar by the central government have 

supported relatively steady growth in domestic supplies—and consumption—

of centrifugal mill sugar (fi g. 6). The intent has been to reduce and eventually 

eliminate the requirement for mills to sell levy sugar at below-market prices. 

Although the mills have benefi ted from a reduction in the share of sugar they 

must sell at levy prices from 40 percent in 2000 to 10 percent by 2002, the 

government has not been able to deliver on the goal of eliminating the levy.

Government regulation of sugar trade. Trade in raw and refi ned sugar is 

tightly regulated through adjustments to import tariffs, export quotas, and, 

when needed, fi nancial support to the industry to facilitate exports of surplus 

sugar. With the current shortfall in domestic supplies, the government, in 

February 2009, relaxed the re-export requirement for the Advanced License 

Scheme that allows mills to import raw sugar duty free subject to re-export 

of the equivalent volume of refi ned sugar. Later, the government announced 

unrestricted duty-free imports of raw sugar for April 2009-April 2010, 

9See “Sugar Demand Trends” on 

page 9.

Figure 6

Releases of levy, free-sale, and buffer stock sugar

Million tons

Source: USDA, Economic Research Service using data from Indian Sugar Mills Association.

Levy Free-sale Buffer stock release

0

5

10

15

20

25

2000/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09
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Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

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temporarily eliminating the 60-percent basic ad valorem tariff, the Rs950/ton 

($20/ton) countervailing duty, and the 3-percent education “cess” (tax) on the 

total tariff. Controls on imports of refi ned sugar were also eased by allowing 

duty-free imports of 1 million tons of refi ned sugar during August-November 

2009. With these trade policy adjustments, 2008/09 sugar imports by India 

reached an estimated 2.8 million tons (consisting of about 2.5 million tons 

of raw sugar and 0.3 million tons of refi ned sugar), and 2009/10 imports are 

projected at about 6.0 million tons (consisting of about 5 million tons of raw 

sugar and 1 million tons of refi ned sugar). 

Other restrictions on domestic marketing. The record rise in domestic 

sugar prices during 2008/09 led to additional regulatory measures aimed 

at providing short-term relief for consumers. In addition to the release of 

government-owned buffer stocks beginning in mid-2008, state governments were empowered in March 2009 under provisions of the Essential 

Commodities Act to prevent “hoarding” of sugar by imposing stockholding 

limits and stock turnover requirements for privately held stocks with traders 

and food processors. Initially, the government imposed stock limits of 200 

tons and a required turnover of 1 month, with some large governmentrecognized dealers and importers exempt from the restrictions. In August 

2009, the government set maximum limits of 15 days of stocks for large 

bulk consumers. 

In May 2009, the government suspended futures trading in sugar in an effort 

to control “speculative tendencies” in the market. This step was also taken in 

response to rising domestic prices of other commodities, including wheat and 

pulses, and refl ects offi cial unease with the role and impacts of India’s new 

futures exchanges in domestic commodity markets. The suspension of futures 

trading in sugar was initially intended to last through December 2009 but 

remained in effect as of March 2010.
9

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In contrast to the volatility of sugar production and prices, sugar consumption in India has grown relatively steadily, increasing about 3.7 percent annually (2.0 percent per capita) since 1990/91 (fi g. 7). While policies have been 

associated with considerable volatility in sugar production, trade, stocks, and 

prices, government distribution programs have led to relatively stable growth 

in per capita sugar availability. The stable growth in consumption is also 

refl ective of both the robust growth in aggregate demand (outward shifting 

demand curves) and the price inelasticity, or unresponsiveness to changes in 

prices, of sugar demand. These factors stem from sugar’s importance as an 

ingredient in tea, coffee, soft drinks, and traditional sweets that play a central 

role in Indian diets. 

Refi ned centrifugal sugar from sugarcane is the dominant sweetener in India, 

with the two traditional sugarcane-based sweeteners, gur and khandsari, 

accounting for smaller shares of overall use. Khandsari has been declining 

in terms of production and consumption, and it now accounts for only about 

3 percent of the market, but gur maintains a signifi cant, albeit variable, 

25-percent share of the market. Gur production and consumption are unregulated and tend to rise in years when higher gur prices or payment arrears by 

sugar mills create incentives for farmers to divert sugarcane to production 

of gur. During 2008/09 and 2009/10, gur’s share of the market rose to about 

35 percent when growers diverted sugarcane from the fi nancially distressed 

mills, magnifying the drop in centrifugal sugar production caused by reduced 

sugarcane plantings (fi g. 8). 

Although India does have an ethanol-petrol blending program using ethanol 

produced from sugarcane, the program does not, so far, affect the supply of 

sugarcane for the production of sweeteners. Unlike Brazil, India produces 

all of its ethanol from molasses, which is a normal byproduct of India’s 

centrifugal sugar milling process. As a result, there is no tradeoff between 

sugar and ethanol production. India’s current goal is to require a 10-percent 

blend of ethanol with petrol in 20 states and 4 union territories, subject to its 

Sugar Demand Trends

Figure 7

Per capita sugar consumption in India

Kgs per capita

Source: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online.

1970/71 75/76 80/81 85/86 90/91 95/96 2000/01 05/06

0

5

10

15

20

25
10

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

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commercial viability. The drop in sugar production in 2007/08 and 2008/09 

has led to reduced supplies and higher prices for molasses, and mills have 

been unable to deliver ethanol at the currently negotiated price of Rs21.5/liter 

(about $1.75/gallon). The ethanol blending program is expected to resume in 

2010/11, assuming a recovery in output of sugar and molasses.

Figure 8

Use of sugarcane in India

Percent of total

Source: USDA, Economic Research Service using data from Indian Sugar Mills Association.

Gur Khandsari Seed

0

20

40

60

80

100

1990/91 92/93 94/95 96/97 98/99 2000/01 02/03 04/05 06/07 08/09

Sugar
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Like sugar production, sugar trade in India is cyclical, with exports of 

primarily refi ned sugar during periods of surplus and imports of mostly raw 

sugar during periods of defi cit (fi g. 9). Consistent with the increased volatility 

of sugar production since the early 2000s, swings in sugar trade have also 

become more volatile. Since 2000, India’s sugar trade has fl uctuated between 

average net exports of 1.3 million tons during 2000/01-2002/03, net imports 

of 1.2 million tons during 2003/04-2004/05, net exports of 3.3 million tons 

during 2005/06-2007/08, and forecast net imports of 4.3 million tons during 

2008/09-2009/10. 

The shifts in India’s sugar trade are increasingly signifi cant for world 

markets, contributing to periods of both undersupply and oversupply. India’s 

record 2007/08 exports accounted for about 11 percent of global exports, and 

record imports in 2009/10 are forecast to account for 12 percent of world 

imports (fi g. 10). India’s current shift to large net importer is further tightening a world sugar market that continues to adjust to European Union (EU) 

sugar policy reforms begun in 2006. The EU reforms, including reduced 

price supports, are due to be completed in 2009/10 and have led to sharp 

declines in sugar production and exports by member nations. During 2006/07 

and 2007/08, the EU-25 averaged net sugar exports of 4.6 million tons, but 

by 2008/09, the EU-27 became a net importer of 2.1 million tons of sugar.10

The major sugar import markets affected by the instability of Indian supplies 

are mostly nearby countries in South and Southeast Asia and the Middle 

East, including Bangladesh, Sri Lanka, the United Arab Emirates, Pakistan, 

Malaysia, Indonesia, and Yemen (app. table 2). India is a small supplier of 

sugar to the U.S. market, with annual exports averaging 8,082 tons during 

2000/01-2007/08. Brazil, the world’s largest sugar exporter, is India’s major 

supplier during years of defi cit. 

10Bulgaria and Romania joined the 

EU in 2007, which accounts for the use 

of both “EU-25” and “EU-27.”

Figure 9

Indian sugar trade

Million tons, raw value

Source: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online.

Refined exports Raw exports Refined imports Raw imports

-8

-6

-4

-2

0

2

4

6

8

1990/91 92/93 94/95 96/97 98/99 2000/01 02/03 04/05 06/07 08/09

Sugar Trade
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Figure 10

India’s share of world sugar trade

Percent of world total

Source: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online.

Exports Imports

0

2

4

6

8

10

12

14

1990/91 92/93 94/95 96/97 98/99 2000/01 02/03 04/05 06/07 08/09
13

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India likely has signifi cant potential to expand sugarcane production by 

increasing both planted area and yield. While India’s area planted to sugarcane, averaging about 4.5 million hectares per year of primarily irrigated land, 

is the second largest in the world (to Brazil), it accounts for a relatively small 

share of India’s cropped area (about 142 million hectares) and net irrigated 

area (about 60 million hectares). Sugarcane, however, is a year-round crop that 

typically remains in the fi eld for 3 years, and returns to sugarcane production 

must be competitive for irrigated land on which two, and in some areas three, 

crops are taken in one year. Figure 11 provides gross returns from sugarcane, 

wheat-paddy double crops common in irrigated areas of north India, and 

paddy-paddy double crops common in irrigated areas of south India over a 

10-year period. A comparison shows generally higher returns to sugarcane, 

based on both average SAPs and the lower SMPs, although there has been a 

convergence in recent years due to the relatively large increases in wheat and 

paddy MSPs. However, cost of cultivation data indicate that labor costs for 

sugarcane are roughly double those for wheat and paddy, suggesting that labor 

availability and costs may be constraints to growth in sugarcane area.

India also appears to have the potential to improve sugarcane yields, and 

the average sugar content of harvested sugarcane, through a continued shift 

of planted area from northern states, where the climate is subtropical, to 

southern states, where the climate is tropical and conducive to higher sugarcane yields and sugar recovery rates. Sugarcane yields in India average 

about 68 tons per hectare, about the same as China but below other major 

producers, such as Australia, Brazil, and Mexico (fi g. 12). But, an increasing 

share of India’s sugarcane is being planted in southern states, where yields 

average about 83 tons/hectare, rather than in north India, where yields 

average about 58 tons/hectare (fi g. 13). Although the northern state of Uttar 

Sugarcane Production Potential

Figure 11

Gross returns from sugarcane, wheat and paddy production in India

Rupees per hectare

1

Gross returns at Statutory Minimum Price.

2

Gross returns at average State Advised Price.

3

Gross returns at Minimum Support Price.

Sources: USDA, Economic Research Service using data from USDA, Foreign Agricultural 

Service, PS&D Online; and Government of India, Ministry of Agriculture, Directorate 

of Economics and Statistics.

Sugarcane 

at SMP1 Sugarcane at SAP2

Wheat + paddy at MSP3

Paddy + paddy at MSP3

0

2,000

4,000

6,000

8,000

10,000

1988/89 91/92 94/95 97/98 2000/01 03/04 06/07 09/10
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Pradesh—the historical center of the Indian sugar industry—still accounted 

for about 46 percent of sugarcane area and 39 percent of output during 

2005/06-2007/08, the southern state of Maharashtra, where both average 

yields and the sugar content of sugarcane are higher, is now the largest 

producer of sugar. Most Indian sugarcane is grown under irrigation in all 

major producing states, providing favorable conditions for improving average 

yields (fi g. 14). 

Figure 12

Top 10 world sugarcane producers ranked by 2005-07 average yield

Tons per hectare

Source: USDA, Economic Research Service using data from Food and Agriculture 

Organization of the United Nations, FAOSTAT.

87.8

81.8

75.7 75.2

68.1 67.7

53.2 50.4 48.8

28.8

Australia

Colombia

Mexico

Brazil

India

China

Thailand

Pakistan

South

Africa

Cuba

Figure 13

Tropical and subtropical state sugarcane yield and tropical state 

share of area in India

Yield (tons per hectare)

Source: USDA, Economic Research Service using data from Indian Sugar Mills Association.

Area share (percent)

Subtropical state average yield

Tropical state average yield

Tropical state % of sugarcane area (right axis)

1980/81 83/84 86/87 89/90 92/93 95/96 98/99 2001/02 04/05 07/08

0

20

40

60

80

100

0

5

10

15

20

25

30

35

40

45
15

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

Figure 14

Share of sugarcane area irrigated for major Indian states 

(2003/04-05/06 average)

Percent of total

Source: USDA, Economic Research Service using data from Government of India, 

Ministry of Agriculture and Cooperation, Directorate of Economics and Statistics; and USDA.

0

20

40

60

80

100

Uttar

Pradesh

Maharashtra

Tamil

Nadu

Karnataka

Andhra

Pradesh

Gujarat

Haryana

Uttarakhand

Punjab

Bihar

Others

Share of sugarcane area irrigated Share of total sugarcane area in India
16

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

With the 2009/10 Indian sugarcane harvest largely completed, sugarcane and 

sugar production will fail to recover from the poor 2008/09 outturn. Despite 

positive price signals, including a 32-percent real increase in the average SAP 

for sugarcane, the recovery in sugarcane area appears to have been impeded 

by fi nancial distress in the sugar milling industry that led to large payment 

arrears to growers during 2008. A recovery in sugarcane yields was likely 

also slowed by a reduced share of relatively high-yielding fi rst-year plantings, 

as well as shortages of irrigation water in some areas following the belownormal rainfall in 2009. With sugar stocks depleted by government releases 

of levy, free-sale, and buffer stock supplies in an effort to stabilize domestic 

prices, 2009/10 sugar imports are forecast at a record 6 million tons.

For 2010/11, the outlook is for a potentially strong recovery in sugarcane 

and sugar output that could sharply reduce or eliminate the need for additional imports. With the fi nancial condition of the sugar mills strengthened 

by high prices for free-sale sugar in 2009, growers may be more responsive 

to price support policies announced during 2009/10. Although the change 

in price policy triggered some initial uncertainty among growers, the new 

FRP for sugarcane for 2009/10—Rs130/100 kgs, 60 percent above the SMP 

announced for 2008/09—will transfer more of the burden of supporting 

higher SAPs from the sugar mills to the central government. So far, nominal 

increases in the SAPs for sugarcane have been announced in the major 

state of Uttar Pradesh (28 percent) and in Punjab and Haryana (21 percent). 

Smaller nominal hikes have been announced in the MSPs applicable in all 

states for paddy (11 percent) and wheat (2 percent). Sugarcane SAPs for 

southern states have not yet been announced for 2009/10. 

On top of the large relative increases in sugarcane SAPs in 2008/09, the 

announced support prices suggest a strong recovery in sugarcane area in 

2010/11. Most planting of new cane area will occur during March-May 

2010 and will not necessarily be affected by the poor monsoon rainfall 

in 2009. With a return of normal weather patterns in 2010 and a surge in 

new plantings with relatively high yields, average yields are also likely to 

improve in 2010/11. A return to the average area (5.1 million hectares) and 

yield (69 tons/hectare) achieved during the most recent cyclical peak years 

of 2006/07-2007/08 would provide a sugar outturn of 29-30 million tons, 

likely suffi cient to meet consumption and stock-building needs without 

signifi cant additional imports. A return to longer term average area and 

yield would suggest an outlook for substantially lower production and 

higher imports in 2010/11. But, given the cyclical behavior of prices and 

output in the sector, the recent cyclical peaks may be a more suitable reference for forecasting 2010/11 prospects. 

The government and the sugar industry in India are engaged in an ongoing 

debate on potential policy reforms to stabilize the profi tability of sugarcane 

production and processing and reduce the increasingly volatile cycles in the 

sector. There appears to be agreement that the key problem is a lack of alignment between administered prices for sugarcane on the one hand, and the 

Sugarcane and Sugar Output Poised 

 for Rebound
17

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

administered and market prices for sugar and other byproducts on the other. 

Ideas that have been under discussion for a number of years include a shift 

to formula-based pricing that links sugarcane prices to prices for sugar and 

other byproducts, removal of the monthly release mechanism, establishment 

of strategic sugar stocks along with a price-band mechanism, and removal 

of nontariff restrictions on sugar trade. However, the two sides have not 

reached consensus on any specifi c reforms. The recent shift to the concept of 

supporting FRPs for sugarcane appears to provide states with the scope for 

setting SAPs for sugarcane that are further delinked from domestic and world 

market conditions, suggesting prospects for continued volatility. 
18

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

Food and Agriculture Organization of the United Nations. FAOSTAT. 

http://faostat.fao.org/default.aspx

Government of India, Ministry of Agriculture and Cooperation, Directorate 

of Economics and Statistics. Agricultural Statistics at a Glance, various 

annual issues. http://agricoop.nic.in/Agristatistics.htm

Government of India, Ministry of Agriculture and Cooperation, Directorate 

of Economics and Statistics. Cost of Cultivation of Principal Crops in 

India, 2007. http://dacnet.nic.in/eands/costofcultivation.pdf

Government of India, Ministry of Agriculture and Cooperation, Commission 

for Agricultural Costs and Prices. Reports of the Commission for Agricultural Costs and Prices for the Crops Sown During 2003-04 Season.

Government of India, Ministry of Commerce and Industry, Offi ce of the 

Economic Adviser. Wholesale Price Index Data. http://eaindustry.nic.in/

Government of India, Ministry of Consumer Affairs, Food, and Public 

Distribution. Sugar policy announcements. http://fcamin.nic.in/dfpd/

EventListing.asp?Section=Sugar&id_pk=121&ParentID=0 

Government of India, Ministry of Consumer Affairs, Food, and Public Distribution, Department of Food and Public Distribution. Order S.O. 2665(E)/

EssCom./Sugarcane, New Delhi, October 22, 2009. http://fcamin.nic.in/

sugar/spf0001.pdf 

Indian Sugar Mills Association. 2006. Indian Sugar Yearbook, 2005-06.

U.S. Department of Agriculture, Foreign Agricultural Service. Attache 

Reports.

U.S. Department of Agriculture, Foreign Agricultural Service. Production, 

Supply, and Distribution Data Online.

References
19

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

Appendix table 1

Production, supply, and use of sugarcane and centrifugal sugar in India (October/September 

marketing years)

Sugarcane Centrifugal sugar

Area Yield Production Production Imports Exports Domestic

consumption

Ending

Raw Refi ned Total Raw Refi ned Total stocks

1,000 ha.Tons/ha. 1,000 tons ------------------------------------- 1,000 tons, raw value --------------------------------

1980/81 2,670 57.8 154,250 6,542 0 0 228 65 0 65 6,373 1,058

1981/82 3,190 58.4 186,360 9,727 0 0 0 408 0 408 6,823 3,554

1982/83 3,360 56.4 189,510 9,508 0 0 0 441 0 441 7,622 4,999

1983/84 3,110 56.0 174,080 7,042 0 81 81 765 0 765 8,900 2,457

1984/85 2,950 57.7 170,320 7,071 0 1,298 1,298 20 0 20 9,116 1,690

1985/86 2,850 59.9 170,650 8,149 0 1,732 1,732 39 0 39 9,493 2,039

1986/87 3,080 60.4 186,090 10,153 0 1,020 1,020 0 21 21 10,352 2,839

1987/88 3,280 60.0 196,740 10,591 0 76 76 0 19 19 10,886 2,601

1988/89 3,330 61.0 203,040 10,177 0 0 0 30 0 30 11,433 1,315

1989/90 3,440 65.6 225,570 12,575 0 53 53 0 32 32 11,535 2,376

1990/91 3,690 65.3 241,050 13,707 0 0 0 0 239 239 12,281 3,563

1991/92 3,840 66.1 254,000 15,249 0 0 0 0 590 590 12,977 5,245

1992/93 3,570 63.9 228,030 12,447 0 0 0 0 390 390 13,800 3,502

1993/94 3,420 67.2 229,660 11,704 0 1,500 1,500 0 30 30 13,900 2,776

1994/95 3,870 71.2 275,540 16,410 0 685 685 0 40 40 13,841 5,990

1995/96 4,150 67.7 281,100 18,225 0 0 0 0 940 940 14,820 8,455

1996/97 4,170 66.6 277,560 14,616 0 27 27 0 422 422 15,697 6,979

1997/98 3,930 71.1 279,540 14,592 0 1,000 1,000 0 21 21 16,700 5,850

1998/99 4,050 71.3 288,720 17,436 0 1,075 1,075 0 10 10 16,977 7,374

1999/00 4,220 70.9 299,320 20,219 0 438 438 0 25 25 17,296 10,710

2000/01 4,320 68.5 295,960 20,480 0000 1,360 1,360 17,845 11,985

2001/02 4,410 67.4 297,210 20,475 100 0 100 0 1,130 1,130 19,760 11,670

2002/03 4,520 63.6 287,380 22,140 10 0 10 0 1,410 1,410 20,260 12,150

2003/04 3,930 59.5 233,860 15,150 550 0 550 0 250 250 19,115 8,485

2004/05 3,660 64.8 237,080 14,170 2,135 0 2,135 0 40 40 20,385 4,365

2005/06 4,200 66.9 281,170 21,140 50 0 50 0 1,510 1,510 19,870 4,175

2006/07 5,150 69.0 355,520 30,780 0000 2,680 2,680 22,425 9,850

2007/08 5,040 69.1 348,190 28,630 0 0 0 3,330 2,500 5,830 23,500 9,150

2008/09 4,380 61.9 271,250 16,130 2,500 300 2,800 0 190 190 24,200 3,690

2009/10 4,250 65.4 278,000 17,300 5,000 1,000 6,000 0 10 10 23,500 3,480

Sources: U.S. Department of Agriculture, Foreign Agricultural Service, PS&D Online; Government of India, Ministry of Agriculture 

and Cooperation, Directorate of Economics and Statistics.
20

Indian Sugar Sector Cycles Down, Poised To Rebound / SSS-M-260-01 

Economic Research Service/USDA

Appendix table 2

Indian sugar exports and imports by major partner (October/September)

Country 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/091

1,000 tons, raw value

Exports

Bangladesh 187.4 72.4 243.9 120.8 0.3 177.9 266.5 917.8 0.3

China 38.9 0.1 2.6 0.0 0.0 0.3 107.2 229.3 0.0

Djibouti 2.0 3.4 9.4 0.0 0.0 13.7 93.0 188.1 14.4

Egypt 0.5 0.0 49.6 0.1 0.0 0.0 33.0 206.8 0.0

Indonesia 196.3 166.1 114.3 24.0 2.0 38.3 200.6 175.8 0.3

Iran 5.0 12.8 5.4 0.0 0.0 0.0 51.0 221.5 0.6

Kenya 0.6 0.1 2.4 0.4 0.0 0.0 44.5 117.0 6.8

Malaysia 50.4 332.4 330.2 70.2 6.2 18.6 14.0 356.8 8.4

Pakistan 342.2 23.0 34.8 6.4 3.9 783.9 254.2 63.4 9.7

Saudi Arabia 2.5 0.4 0.7 0.6 0.9 0.7 25.4 245.9 19.4

Singapore 27.2 35.9 45.7 6.1 0.4 10.4 34.9 21.5 0.5

Somalia 9.5 15.1 101.4 16.2 1.6 27.7 152.4 292.1 7.2

Sri Lanka 152.5 278.6 354.7 100.1 15.4 149.0 309.7 549.7 71.3

UAE 32.9 63.8 72.5 12.5 1.8 20.3 94.1 1,289.2 23.5

United States 1.5 11.1 13.9 9.1 1.4 12.7 12.5 2.4 2.0

Yemen 22.6 8.0 146.8 0.2 0.1 26.3 346.0 269.9 1.4

Other 134.2 111.4 299.5 37.5 45.2 88.9 483.9 704.6 46.9

Total 1,206.4 1,134.7 1,827.7 404.1 79.2 1,368.7 2,523.1 5,851.7 212.7

Imports

Australia 0.0 0.0 0.0 42.0 25.0 0.5 0.0 0.0 0.0

Brazil 0.0 0.0 4.7 206.9 1,075.8 0.1 0.0 0.0 985.7

Mozambique 0.0 0.0 0.0 0.0 21.0 0.0 0.0 0.0 0.0

Pakistan 33.9 0.3 0.0 0.0 0.0 3.6 0.0 0.0 0.0

South Africa 0.0 0.0 0.0 73.0 101.4 0.0 0.0 0.0 29.6

Other 0.6 0.0 0.6 2.2 11.8 3.3 0.5 0.2 73.4

Total 34.4 0.4 5.3 324.0 1,235.0 7.4 0.5 0.2 1,088.7

1October/August data.

Source: World Trade Atlas.