Perspectives from ISB

Sridhar Kundu : Sr. Research Analyst, Bharti Institute of Public Policy

I. Introduction

Sugar is a daily consumable commodity in every household.  Demand for sugar comes from both domestic consumption and exports. In 2018-19, the total export earnings from sugar were INR10,000 crore for meeting the export demand of 4 million tonnes (Agriculture Statistics, 2019).

On the supply side, sugarcane is a cash crop. It provides immediate cash in the hands of farmers. Interviews with farmers by news channels confirm relatively higher profits in sugarcane farming (Gaon Connection,2019). High profits could be an incentive for higher production. Since independence, sugarcane production in India has witnessed an upwards trend. In 1950-51, the total sugarcane production was 57 million tonnes, and it crossed the 400-million tonne mark in 2018-19, with an annual average growth of over 8 per cent per annum.

However, the increasing focus on sugarcane production by farmers has led to some ecological imbalances. These imbalances are more advanced in the region where farmers produce sugarcane despite water scarcity. The present piece elaborates on the sugarcane production in Maharashtra with a focus on issues of profitability and water scarcity.

II. Status of Maharashtra in Sugarcane Production

Sugarcane is a tropical grass. The climatic conditions in India are apt for its production. However, the production of sugarcane is not homogenously distributed across states; there is a horizontal inequality. This horizontal distribution of sugarcane can be explained by state-wise production. Maharashtra is one of the major sugarcane producing states in India. In 2017-18, it ranked second behind Uttar Pradesh for sugarcane production.

The all-India sugarcane production in 2017-18 was 380 million tonnes, with Maharashtra contributing 82 million tonnes. In terms of percentage share, Maharashtra contributes about 22% whereas Uttar Pradesh contributes about 47%of of India’s total sugarcane production and stands as the highest sugarcane producing state.  These production statistics show that about two-third of total sugarcane produced in India comes from these two states. Other states include Karnataka, Tamil Nadu, Bihar and Uttarakhand, but their share in India’s total production is relatively lower (Figure1- StatewiseProductionShareOfSugarcane).

III. Production Trend in Maharashtra

In the last two decades, production of sugarcane in Maharashtra has witnessed a growth.  In 1997-98, total production of sugarcane in the state was less than 1 million tonnes (i.e. 0.16 million tonne) and it increased to 82 million tonnes in 2017-18. (Figure2-AnnualTrendOfSugarcaneProductionInMaharashtra).

Annual production growth in the state has been noted above 2500 percent during the last 20 years. Although low base effect could be one reason for this high growth, it can be concluded from the last 20-year trend that the state has achieved a significant growth in sugarcane production.

IV. Profitability in Sugarcane Production

Profitability can be explained here by the difference in value of cost of production and market prices. Higher the difference, more the profitability. In case of sugarcane, the cost of production came down because of high yield.

Yield of sugarcane is very high compared to other crops like paddy, wheat and other food grains. In 2018-19, sugarcane yield was above 90 tonnes per hectare whereas, wheat yield was 1.7 tonne per hectare in Maharashtra. Yield data of last 20 years from India Data Portal presents the fact that sugarcane production (yield) decimated other crops.

The next factor of profitability is the declaration of Minimum Support Price (MSP), which is the guaranteed price farmers would get from the market and government shops. This price fixation guarantees farmers’ profit which encourages them on the quantity of production rather than thinking what needs to be produced according to tropical and ecological situation of the region.

The last 20-year data shows that MSP has remained higher than even the production cost (C3). The C3 cost includes all fixed and operational cost of production even including all the imputed costs that the farmers went through during the production stages and a margin of profit for their participation as entrepreneurs in the process. In 2017-18, the sugarcane production cost C3 in Maharashtra was INR 212 per quintal. (Figure 3-ProductionCost(C3)OfSugarcane). In the same year, the MSP for sugarcane was INR 255 per quintal (Figure4-AnnualTrendOfMSPForSugarcane). This means that a farmer would earn an additional profit margin of INR 33 per quintal.  This margin would even benefit the small and marginal farmers who have less than 2 hectares of land holdings and encourage them to produce sugarcane.

V. Issues of Water Scarcity

With an objective to earn higher profits, farmers focus on improving the yield.  For the yield improvement, they started depending on irrigation. In the process, a major share of groundwater is used for irrigating sugarcane crops. Irrigation percentage for sugarcane crop in India has gone up from 67 per cent in 1950 to 96 per cent in 2015, as per the latest information from the Department of Agriculture.  The water scarcity issues can be better explained with the district-level analysis of sugarcane production in Maharashtra.

Sugarcane production is not homogenously distributed across all districts. Eight districts out of 38 shared more than 80 percent of total production in the state in 2017-18. These districts are Kolhapur (18%), Pune (16%), Ahmednagar (14%), Solapur (13%), Sangli (10%), Satara (10%). (Figure 5-DistrictwiseProductionShareOfSugarcaneinMaharashtra)

All eight districts under Aurangabad division, called the Marathwada region, contribute about 15 per cent to the total sugarcane production in the state. These districts are Aurangabad, Beed, Jalna, Osmanabad, Nanded, Latur, Parbhani and Hingoli.

The water scarcity issue arises as the Marathwada farmers produce sugarcane even though it is a water scarce region. This region receives low rainfall compared to the other parts of the state. In 2019 (January to December), Konkan region received above 450 cm rainfall while the eastern part of the state, which falls under Marathwada, received 85 cm of rainfall. In 2018, the Marathwada region received even less than 60 cm of rainfall.

With less rainfall, and increasing interest and dependence on sugarcane production, there is a rise in dependence on groundwater to irrigate the land. As a result, there is continuous depletion of the levels of groundwater. Average depth of water table, better explained by the depth of well in this region has gone above 10 meters. In comparison with the other districts in the state, average depth of well in Raigarh is less than 1 meter (Figure6-DepthOfWaterLevelInRaigarhDistrictIn2017),  whereas the same in Osmanabad is above 5 meters (Figure 7-DepthOfWaterLavelInOsmanabadDistrict).

VI. Conclusion

Every profit may not be good economics. If profit in a production is not sustainable, it could create negative externalities and therefore, considered to be bad economics,as seen in the case of sugarcane production in Maharashtra’s Marathwada region. Profitability can be a factor to encourage farmers to produce sugarcane in various parts of the country, including from Marathwada. It could be one reason behind the exponential growth in sugarcane production. However, encouraging production of sugarcane in Marathawada region may not be a sustainable model of growth. With lower levels of groundwater in this region, sugarcane production could multiply the crisis in the long run.

This blog is being published under India Data Portal blog series.

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“The views expressed in this article are personal. Sridhar Kundu is  Sr. Research Analyst at the Indian School of

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