Reviving India’s sugar industry: Unlocking the potential of stored syrup technology
India’s sugar industry, an integral part of the country’s agricultural and economic fabric, is facing significant challenges. The sector, which supports around 50 million farmers and over half a million workers, is in urgent need of revival. Approximately 700 sugar factories are installed across the nation, but only about 525 of these units are currently operational. The remaining 175 mills are non-operational or classified as sick, leading to severe economic losses and threatening the livelihoods of millions who depend on sugarcane farming.
However, amidst this crisis, there is an opportunity for renewal through the introduction of innovative technologies. One such promising development is the use of stored syrup technology, also known as biosyrup, which could potentially revolutionize the sugar industry. This analysis examines the current state of India’s sugar mills, explores the major causes of their decline, and evaluates how stored syrup technology can rejuvenate the sector by offering new revenue streams and improving overall sustainability.
Current scenario of sugar mills in India
India is the second-largest producer of sugar in the world, contributing around 15 per cent of the global production. The sector is critical for rural economies, particularly in States such as Uttar Pradesh, Maharashtra, and Karnataka. Despite its significant role in agriculture, the industry faces a range of structural and financial problems that have led to the closure of nearly one-quarter of its sugar mills. These mills, many of which are in poor financial health, are unable to operate efficiently due to high costs, fluctuating sugar prices, and an inability to diversify beyond sugar production.
India’s sugar mills are primarily reliant on the production of crystalline sugar and its by-products, such as molasses, bagasse, and press mud. This over-reliance on sugar exposes them to market volatility, as demand and prices for sugar can fluctuate drastically based on domestic and international factors. The result is a cycle of poor profitability, delayed payments to farmers, and a growing inventory of unsold sugar, which compounds the industry’s liquidity challenges.
Major reasons for mills becoming sick
Several interrelated factors have contributed for sugar mills in India becoming sick, creating a perfect storm that threatens the long-term viability of the industry:
Over-reliance on sugar production: Most mills have not diversified their product portfolios. They are primarily dependent on sugar, which makes them vulnerable to price fluctuations. Mills without distilleries or ethanol plants miss out on the opportunity to diversify income streams by producing ethanol or other by-products.
Price volatility in the sugar market: The sugar market is highly volatile, influenced by global price trends, domestic production surpluses, and government policies. Sudden drops in sugar prices can wipe out profit margins, leaving mills financially exposed.
Cash flow and liquidity issues: The cyclical nature of sugar production — with cane crushing concentrated in a few months of the year — creates long periods of inactivity, which increases inventory costs and ties up working capital. Mills struggle to manage liquidity and face delays in payments to sugarcane farmers, resulting in dissatisfaction and a declining interest in sugarcane cultivation.
Delayed payments to farmers: Government-mandated minimum support prices (MSP) for sugarcane often exceed the market price of sugar, leading to financial distress for mills. As mills fail to clear their dues to farmers on time, many farmers abandon sugarcane farming or divert their produce to other industries, further exacerbating the challenges faced by mills.
Lack of modernisation: Many sugar mills have not upgraded their equipment or adopted new technologies, making them less efficient and more expensive to operate. This lack of modernization results in higher costs and lower profitability, putting many mills on the path to becoming sick or non-operational.
High operational costs: The costs of running a sugar mill — such as procurement of sugarcane, labor costs, and power consumption — are high, leaving little room for profit, especially during periods of low sugar prices.
Financial constraints: The lack of funds to install distilleries or modernize existing facilities has hampered the ability of many mills to diversify and remain competitive.
These problems are not isolated; they are intertwined, creating a vicious cycle in which mills struggle to stay profitable, leading to more closures and widespread rural economic disruption.
The promise of stored syrup (biosyrup) technology
Stored syrup technology, or biosyrup, offers a promising solution for reviving the ailing sugar industry. Unlike traditional sugar production, where molasses is produced as a by-product, stored syrup is a concentrated form of inverted sugar that can be stored for over a year without degradation. It is particularly suited for ethanol production, which is crucial as India aims to increase ethanol blending in its fuel mix to reduce its dependence on fossil fuels and cut greenhouse gas emissions.
What is stored syrup
Stored syrup is a concentrated syrup derived from sugarcane juice. It is created by concentrating the juice through evaporation, converting the sugars into an inverted form that enhances its stability. Stored syrup can be used to produce ethanol, which can be sold throughout the year, offering sugar mills greater flexibility in production planning and cash flow management.
The key difference between stored syrup and traditional sugar production is that stored syrup provides a long-term storage solution for sugarcane juice. Instead of converting all juice into sugar and molasses immediately, mills can store syrup for use during the off-season, producing ethanol as needed. This provides a buffer against market fluctuations and allows for strategic selling when prices are favorable.
Advantages of stored syrup technology
Diversification of revenue streams: By producing stored syrup, sugar mills can reduce their dependence on sugar production alone. This allows them to tap into the growing ethanol market, which is becoming increasingly profitable due to government incentives for ethanol blending. This diversification helps stabilize income and reduces the risks associated with fluctuating sugar prices.
Profitability in off-season: Stored syrup can be preserved for extended periods, enabling mills to generate revenue even during the off-season. This capability helps smooth cash flow, reduce inventory pressure, and ensure a consistent income stream throughout the year, mitigating the financial impact of seasonal production cycles.
Increased production flexibility: The technology allows mills to switch between producing sugar and ethanol based on current market conditions. This flexibility enables more agile decision-making, allowing mills to optimize their operations and profitability by responding quickly to changes in market demand and prices.
Lower capital investment: Implementing stored syrup technology requires significantly less capital investment compared to building a full-fledged distillery. The infrastructure needed for stored syrup production is more affordable, making it a viable option for even financially constrained mills looking to diversify their operations.
Support for ethanol blending programme: India aims to achieve 20% ethanol blending with petrol by 2025. Stored syrup can contribute to this goal by providing a consistent and reliable feedstock for ethanol production throughout the year. This supports the country’s energy security goals and helps reduce dependence on fossil fuels.
Additional products beyond sugar and molasses: By adopting stored syrup technology, sugar mills can diversify their product portfolio. In addition to producing sugar and molasses, they can produce syrup, opening up new revenue streams and reducing dependency on sugar sales alone. This diversification enhances the financial stability of the mills.
Higher off-season prices: Stored syrup can be sold during the off-season when prices are typically higher. This strategy helps improve the financial viability of sugar mills, providing them with a stable revenue stream even when sugar production is not profitable. It allows mills to take advantage of market conditions to maximize their earnings.
Improved cash flow and timely payments to farmers: Stored syrup, like molasses, can be sold even before it is fully manufactured. This early sale secures liquidity for sugar mills, enabling them to make timely payments to farmers. This strengthens relationships with cane growers and ensures a stable supply of sugarcane, which is essential for continuous production.
Benefits for standalone distilleries: Standalone distilleries can also benefit from stored syrup technology. Many distilleries face challenges in securing a consistent feedstock supply for ethanol production. Stored syrup provides a reliable, year-round source of raw material, helping distilleries improve their operations and maintain steady production levels.
Reduced Environmental Impact for Distilleries: Distilleries that use stored syrup generate significantly less spent wash per liter of alcohol produced—around 3.0-3.5 liters compared to 7-9 liters in traditional distilleries using B-heavy or C molasses. This reduction in effluent generation lowers the environmental impact and reduces the costs associated with effluent treatment, making the process more sustainable and cost-effective.
Economic comparison: Traditional vs stored syrup production
To understand the economic benefits of stored syrup technology, consider the following comparison for a sugar mill with a capacity of 3000 TCD (Tons of Cane per Day), crushing 4.0 lakh tons of cane annually over 140 days.
Key insights from the comparative analysis
Profitability: Stored syrup production is more profitable compared to traditional sugar production methods. It allows sugar mills to diversify revenue streams, sell at higher prices during the off-season, and stabilize cash flow.
Reduced sensitivity to price fluctuations: By diversifying into stored syrup, mills become less reliant on fluctuating sugar prices, providing more financial stability.
Lower environmental costs: The environmental benefits of producing ethanol from stored syrup, with less effluent generation, make it an attractive option in an era of increasing regulatory pressures for environmental compliance.
Impact of Sugar Price on Profitability
Profitability even at ₹36/kg sugar price: Even if the price of sugar remains at ₹36/kg, selling biosyrup is still more profitable than producing sugar. This shows that stored syrup production is more stable and resilient in low sugar price environments.
Above ₹36/kg sugar price: Once the price of sugar exceeds ₹36/kg, producing sugar using the B heavy molasses route becomes more profitable. However, this threshold price is necessary for sugar production to outpace the profitability of stored syrup. If opportunity cost in offseason is considered for Biosyrup, profitability is more in case of biosyrup even at ₹38/kg over B Heavy route.
Elimination of uncertainty: One of the most compelling advantages of the stored syrup route is that it eliminates the uncertainty associated with sugar price fluctuations. The economics of a mill using the stored syrup route are unaffected by changes in the price of sugar, providing greater stability and predictability in financial planning. This makes biosyrup production a safer and more reliable option for mills compared to the volatile sugar market.
Investment and returns
The initial investment required to implement stored syrup technology includes the cost of reactors, equipment, and storage tanks, amounting to approximately ₹14-15 Crores. While significant, this investment is lower than that required to build a full distillery, and the improved cash flow and profitability can provide quick returns.
Broader Implications for India’s sugar industry
The widespread adoption of stored syrup technology could have far-reaching effects on the Indian sugar industry, including:
Revival of non-operational mills: Stored syrup technology provides a lifeline for many of the 175 non-operational mills, enabling them to restart production and become profitable once again.
Strengthened farmer relationships: Improved cash flow from biosyrup sales enables mills to make timely payments to farmers, strengthening the supply chain and ensuring a stable source of sugarcane.
Support for ethanol blending targets: As India pushes for greater ethanol blending to reduce its reliance on fossil fuels, stored syrup can provide a consistent feedstock for ethanol production, helping the country meet its ambitious targets.
Rural economic development: Reviving sick mills and ensuring the profitability of operational ones can have a positive ripple effect on rural economies, creating jobs and stimulating local development.
Environmental sustainability: The lower effluent generation from biosyrup-based ethanol production aligns with growing environmental regulations and reduces the industry’s ecological footprint.
Challenges and support required
Despite its promise, the adoption of stored syrup technology faces several challenges:
Initial capital investment: For mills already facing financial distress, the investment required for implementing stored syrup technology could be a barrier, although it is less than the cost of setting up a distillery.
Regulatory framework: A clear regulatory framework governing the production, storage, and sale of stored syrup needs to be established to encourage widespread adoption.
Market development: Ensuring a stable and consistent market for biosyrup will be essential to the technology’s long-term success.
Supportive measures
To overcome these challenges, the government and industry stakeholders could consider the following measures:
Allow pledging of stored syrup: This would help mills manage their working capital more effectively by enabling them to use stored syrup as collateral for loans.
Environmental clearances: Biocomposting after extracting CBG (Compressed Biogas) from spent wash should be allowed, as stored syrup technology is more environmentally friendly than traditional molasses-based ethanol production.
Subsidies and incentives: Government subsidies for setting up biosyrup infrastructure and storage tanks would accelerate the adoption of this technology.
Research and Development: Continued investment in R&D to improve stored syrup technology and explore new applications could further enhance its efficiency and appeal.
Conclusion
India’s sugar industry is at a critical juncture. The widespread closure of sugar mills and the financial distress of many others have created an urgent need for innovation and transformation. Stored syrup technology offers a promising solution by providing sugar mills with an alternative, profitable revenue stream that is less sensitive to market fluctuations.
As India seeks to achieve its ethanol blending targets, reduce its dependence on fossil fuels, and create sustainable rural economies, stored syrup technology can play a vital role in this transition. With the right support, regulatory framework, and investment, this technology could lead to a renaissance in India’s sugar industry, ensuring its long-term sustainability and growth.
The potential benefits are clear: by adopting stored syrup technology, struggling mills can be revived, farmer relationships can be strengthened, and the industry can become more resilient to market shocks. The road ahead may be challenging, but the promise of stored syrup offers a compelling vision of a revitalized sugar industry, ready to meet the demands of the future with innovation and sustainability.
(The author is MD Samarth SSK Ltd., Jalna)