Rethinking on growth mechanism of Indian sugar industry
| DOI | https://doi.org/10.1108/JABS-12-2016-0182 |
| Date | 08 July 2019 |
| Published date | 08 July 2019 |
| Pages | 412-432 |
| Author | Sheetal,Rajiv Kumar |
| Subject Matter | Strategy,International business |
Rethinking on growth mechanism of Indian
sugar industry
Sheetal and Rajiv Kumar
Abstract
Purpose –The purpose of this paper is to revisit the growth mechanism of Indian sugar industry by
deployingquantitative and qualitative metaphors.
Design/methodology/approach –The research paper has been composed through comprehensive
primary research survey using a structured questionnaire, and qualitative discussion following semi-
structured interviews with industry professionals on emerging issues across the whole value chain of
sugar industry.Respondents regarding primary survey wereselected using the purposive sampling, and
this collectedquantitative information has beenverified on the lenses of multiple stream modelling(MSM).
Findings –To support the data analysis, MSM –a policy-makingframework has been developed which
found thatgovernment being a centralconstruct exerts a profound presenceacross whole valuechain; in
suppliers’ mechanism, marketing of sugar and sugar mills’ infrastructural expansions. Nationwide
uniformity in sugar policy instead of states’ monopolistic policies, rational and mutual benefits-based
decisions collectively by the government,mills management and sugarcane growers, and diversification
in production processes are enumerated as the proposed solutions against the chronical industry
problems.
Practical implications –This studyenriches extant Asian sugar industry literature.For policymakers, the
proposed resultsshould be of help in identifying specific policies to support the competitiveness of local
systems and individual manufacturing companies in the Indian sugar industry suggesting that the
development of growth mechanismscan contribute simultaneously to improve the financial,market and
operationalperformance of both individual firmsand supply chains.
Originality/value –Cyclicality in production, rising sugarcane farmers’ problems and resulting severe
financial distress of mills are some of the topical issues of Indian sugar industry, and the study has
explored these issuesfactually, quantitatively and qualitativelyin proximity of industry professionals and
describedin this depository with the help of document analysis.
Keywords India, Growth, Diversification, Protectionism, Decontrolling, Sugar industry
Paper type Research paper
1. Introduction
Twenty-first century is in the name of Asia, and Asian economy is mainly agriculture driven.
Agro industries like sugar is an immense source of revenue and employment in rural areas
in discussed economies. Asian sugar industry is exploring the world sugar trade year by
year like Thailand has become world’s second largest exporter after Brazil, Indonesia being
third largest importer after India and China and Philippines’s continuous efforts towards
being a versatile exporter over the decades are some of the instances of Asian nations’
participation in distorted world sugar economy (Solomon et al., 2016). Home to second
world sugar production and first in sugar consumption, India itself has been able to sustain
among top ten sugar exporters of the world in the past five years. Moreover, Indian sugar
industry generates huge revenues; approximately Rs 25 bn annually to the exchequer of
India and yields numerous social and economic benefits to sugarcane growers (Solomon,
2016;Sawhney, 2002). Given such prominent role of sugar industry to India’s economy,it is
Sheetal and Rajiv Kumar
are both based at the Guru
Jambheshwar University of
Science and Technology,
Hisar, Haryana, India.
Received 31 December 2016
Revised 26 June 2017
8 November 2017
Accepted 22 November 2017
The authors are indebted with
the anonymous referees for the
useful comments that greatly
improved the final manuscript.
PAGE 412 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 13 NO. 3 2019, pp. 412-432, ©Emerald Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-12-2016-0182
worth mentioning here that maximum labour force of the rural India is absorbed by this
discussed industry.
Besides augmenting the rural development, the dispersed wholesalers, retailers and sugar
enterprisers across India also benefit from the operations of sugar industry. As far as trends in
sugarcane and sugar production are concerned, both plantations and sugar production in
India have been in seminal figures, namely, 5.29 million hectares and 28.3 million tons,
respectively (Solomon, 2016). Accordingly, India has been able to attain the autarkic status in
sugar in post de-licensing span since 1998 except one major shortfall of 2009. External
attributes like production and export-volume seems to be satisfactory but real picture on
companies’ end is entirely different. Industry is reeling from decades and sugarcane arrears
are profoundly mounting in all sugarcane producing states; at present, 31.65 per cent of total
price payable to farmers has been recorded as arrears plus gap is expanding between total
amount paid and payable year by year as shown in Figure 1 (Department of Food and Public
Distribution, 2016). An added facet of this staggering story is concerned with the performance
of Indian sugar mills. The net worth of 30 per cent of the major sugar companies is appearing
up with negative numerals and the retained profits almost turned negative for all the
companies by 2015 (Prowess, 2015). Besides this, debt equity ratio reached at alarming levels
which is putting questions on the repayment capacity of the mills. Moreover, profitability
indicators such as net profit ratio and ROCE are found to be past five years low as 1 and 10
per cent, respectively (Prowess, 2015). In the past two years, many sugar companies filed for
bankruptcy, but the government is not in favour of giving permission for bankruptcy or
liquidation rather working on viable and feasible solutions for revival (Grant Thornton India LLP
and ISMA, 2015). Seeing this distressed situation of the industry, discussion on identifying
problematic areas across all value chain activities and rethinking of growth mechanism of
Indian sugar industry becomes of prime importance.
Accordingly, present research is structured as follows: at the outset, the literature is
reviewed determinants wise as suggested by Centobelli,2016, 2017 to get insights into the
growth mechanism of world sugar market and brief overview of multiple stream model- a
policy-making theory and its application to present study; quantitative and qualitative
research design is described thereafter; subsequently, results and discussion section is
followed by concluding remarks and practicalimplications.
2. Notable growth determinants in sugar industry –a literary review
World sugar market is residual cum distorted where freely traded sugar is very small to the
tune of only 30 per cent of the total sugar produced (Mitchell, 2004). Additionally,
Figure 1 Total price payable,paid and arrears due to the farmers
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Total Price Payable 33488.72 40125.05 48585.22 43747.18 48710.67 45301.91
Total Price Paid 28960.45 31207.02 36278.97 25312.13 30460.9 30962.78
Arrears 4528.27 8918.03 12306.25 18435.05 18249.77 14339.13
% of Arrears on Price Payable 13.52 22.23 25.33 42.14 37.47 31.65
0
5
10
15
20
25
30
35
40
45
0
10,000
20,000
30,000
40,000
50,000
60,000
Source: Prowess (2016)
VOL. 13 NO. 3 2019 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 413
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