STUDY ON GREEN INNOVATION OPPORTUNITIES FOR FUTURE GROWTH IN SUGAR INDUSTRY IN INDIA Dr. Kunal S. Badade, Head Department of Commerce, PG Centre, Dayanand College of Commerce, Latur and Dean, Commerce Faculty, S. R. T. M. University, Nanded. Prof. Shrikant N. Dhage, In-charge Principal, MIT College of Commerce and Management Studies, Latur-413531, India.
ABSTRACT This paper discusses about the current scenario in the Indian sugar industry, drivers that move forward this sugar industry to realize the importance of innovations, process of sugar and its byproducts production which helps to understand future rowth of the Indian sugar sector and the green opportunities that help this sector to make their entrepreneurship successful. This paper may certainly provide guidelines to the Management, Government, share holders, creditors and employees to take decisions related to their own sphere of interest. INTRODUCTION Sugar is a sector of significant importance to the national economy.
While consumption has been growing historically, the production has been cyclical. At present, the sugar industry is regulated across the value chain. Investments in by- products are at a nascent stage, and the sector has struggled to generate a return on nvested capital in excess of its cost of capital in most years, primarily due to a high mandated fixed cane price and a volatile sugar price. Sugarcane is primarily grown in nine states of India: Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Uttar Pradesh and Tamil Nadu.
More than 50 million farmers and their families are dependent on sugarcane for their livelihood. The sugar industry caters to an estimated 12 percent of rural population in these nine states through direct and indirect employment. Effectively, each farmer contributes to the production of 2. 9 MT of sugar every year. In addition to farmers, an estimated 0. 5 million workers are directly employed as agricultural labour involved in cultivation and harvesting. The sugar industry also supports diversified ancillary activities and skills that support the local economy.
The dependent population creates substantial demand for local goods and services. In addition to the sugar industry’s contribution to the rural economy, it has significant social and economic impact for the nation as well. The sugar industry is a green industry and is largely self sufficient in energy needs through utilization of bagasse or generating electricity and steam. In fact, the sugar industry generates surplus deficit that India is currently facing. The sugar industry is also the primary source of raw material for the alcohol industry in India.
The annual economic contribution of the sugar industry to the exchequer through principal indirect taxes amounts to more than INR 2800 crores.  The innovative business strategies outlined in this paper have the potential to transform the sugar sector and move towards its stated future growth. It needs to be recognized though, that globally, the sugar sector is fast evolving and the impact of ome of these emerging strategies and innovations may require reevaluating the future direction of the sector.
OBJECTIVES OF THE PRESENT PAPER The important objectives of the present paper which cover study on green innovation opportunities for Indian sugar industry are: 1] To know the current scenario of the Indian sugar industry. 2] To know the industry drivers which move forward sugar industry towards green innovations. 3] To understand the process of sugar production and green by products from sugar sector. 4] To know the innovation opportunities in sugar sector. The conclusion drawn from this paper may certainly provide guidelines to the
Management, Government, Share Holders, the Creditors & Employees to take CONTENTS: l] CURRENT SCENARIO OF THE SUGAR INDUSTRY Indian sugar industry has entered the strongest up cycle (lowest stock to use ratio) in the history of 50 years after witnessing supply glut in previous two sugar seasons in a row (SS 2006-08). In SS2006-07, sugar production reached all-time high of 28. 3 mn tonnes, registering a growth of 46. 6% on yoy basis and it declined marginally by 7. 1% to 26. 3 mln. tonnes in SS2007-08. Sugar production reached an all-time low of 14. 7 mln. onnes during SS2008-09 due to sharp fall in the sugarcane acreage. However, sugar consumption continued to grow at a steady pace. It grew at a CAGR of 4% during SS 07-09. In SS2008-09, on account of a steep fall in sugar production and fall in the stock to use ratio, the average wholesale prices increased by almost 50% on yoy basis. This had a positive impact on the margins of sugar companies in the Q4FY09. The production of sugar is spread across the country. Maharashtra, Uttar Pradesh, Karnataka, Tamilnadu, Gujarat and Andhra Pradesh are the major sugar producing states in the country.
In SS2007-08, these six states together accounted for almost 92% of the total sugar produced in India. In SS2007-08, the State of Maharashtra produced the highest sugar at 9. 1 mn tonnes followed by UP with 7. 3 mn tonnes. These two states together account for almost 62% of the total sugar accounts for almost 75%-80% the total operating cost of the sugar industry. UP is the largest sugarcane-producing state in the country and accounted for about 37% of the total sugarcane output in SS 2007-08 followed by Maharashtra with 24%.
Even though, UP is the largest sugarcane-producing state in the country it is the second- largest sugar producer in India as drawal and recovery rates in UP are one of the owest in India. CARE Research expects sugar deficit situation in India to continue in SS2009-10 and SS2010-11. They believe that India will bridge the gap between demand and supply through imports. CARE Research expects that sugar prices will continue to rise till SS2009-10 on account of tight demand and supply situation in country.  Maharashtra is the largest sugar producing State in India.
It accounts for more than one third of the total sugar produced in the country. Sugarcane farming is the source of livelihood for nearly 2. 5 crore population living in rural areas of Maharashtra. The ugar industry provides direct employment to 1, 65,000 workers. Besides 8 lakh workers are engaged in harvesting and transport operations every year for a period of six months. Sugarcane cultivation in the State has become an excellent example of industrial agriculture. The sugar industry provides an annual revenue of over 2,800 crore to the Government.  There were 624 installed sugar factories in the country as on 31. 3. 2009. The sector- wise breakup is as follows: –  Sector No. of Factories Cooperative 317 Private 245 Public 62 Total 624* * Include closed sugar factories. II] SUGAR INDUSTRY SCOT ANALYSIS To adopt good innovation strategies, SCOT Analysis of sugar industry may guide management of the sugar factory. Following is one of the formats for SCOT analysis which can help them:  STRENGTHS India is the second-largest global sugar producer after Brazil. The population and mass consumption indicate robust domestic potential. _ It provides direct downstream industries by providing raw material. It is regulated as it is classified as an essential commodity of mass consumption. _ It is the focal point of rural socio- economic development. CHALLENGES _ Low mill efficiency. Low-cost sugarcane procurement. Vulnerability to political interests. Cyclical nature of the sugar industry. OPPORTUNITIES Potential to enhance sugar production and sugar recovery rate. _ Transition from an adverse sugar cycle to a favourable sugar cycle. _ A growing population (growing at nearly 1. 6%) and consumption are poised to graduate India into the world’s largest sugar producer. Increasing demand for high-value by-products such as exportable power through bagasse and fuel ethanol. _ Significant technological up gradation will enhance yield and recovery. THREATS High cane arrears to farmers due to low sugar prices. Diversion of sugarcane to gur and khandsari. Deteriorating soil quality due to increased use of fertilizers and pesticides. Ill] DRIVERS FOR SUGAR INDUSTRY AND INNOVATION OPPORTUNITIES The sugar industry business strategies identify and evaluate those innovation opportunities that could enable the sector to move towards its future growth.
The strategies also identify the business and policy imperatives for all stakeholders for leveraging these opportunities. CRITICAL BUSINESS DRIVERS The sugar sector has evolved over the years, and India is the second largest producer and largest consumer of sugar in the world. In order to fulfill the stakeholder’s aspirations, there is still a long way to go. Thus, going forward, the stakeholders would need to influence their business drivers so that the sector can move towards its future growth.
The sector would also need to identify and exploit innovative opportunities that would enable this future growth, while benefiting all stakeholders. The stakeholder aspirations are dependent on specific critical business drivers which will enable the sector to fulfill the aspirations. The business drivers may impact more than one stakeholder. Therefore, in some cases, influencing a business driver could nvolve a trade-off between stakeholder aspirations. Figure 1 outlines some of the major business drivers for farmers and millers that have a direct impact on their individual aspirations.
As can be seen from figure 1, the farmer’s economic profit is impacted by the cane price, farm productivity and the cost of cultivation. The key controllable risks for farmers are the risks related to offtake of cane and non payment of dues by the mills. The farmer miller relationship can have a significant impact on both these risks. For mills, the drivers for economic profits are the sugar prices in domestic and nternational markets and by-product realizations. The inventory cost has a negative impact, and also influences the extent of price risk. The mill efficiency influences the milling costs, hence the overall economic profit.
The risk of cane availability is significant for mills, and is influenced by the farmer-miller relationship. Figure 2 outlines some of the major business drivers for consumers and the government that have a direct impact on their individual aspirations. Some of these also have a strong linkage with farmer and miller aspirations. Fig. 2: Business drivers for Consumers and Government For consumers, the availability of a range of sugar-based products is a driver of product variety. Industrial consumers use sugar in various forms including liquid sugar.
The availability and affordability of sugar is dependent on domestic production and prices, which are also driven by the stocks that are held by the mills. For the government, food security is the key aspiration. It is influenced by domestic production as well as India’s linkages with international trade. Energy security is driven by the extent of investments that mills have made in byproduct capacities. The social objectives of the government highlight a key conflict area. From a social perspective, the cane price should be high, so that it benefits the farmer. For the benefit of the consumers, the price of sugar should be low.
In case both of these events occur together, as was seen earlier, they would lead to arrears leading to default of payments to farmers and reduced availability for consumers in the subsequent years. Therefore, the critical business drivers that can be leveraged by the sector to move towards the future growth are: Domestic demand International trade Byproducts value addition Productivity improvement Cyclicality management Cane and sugar pricing Sugar price risk management Product innovation These business drivers need to be leveraged in such a way that the sector is able to fulfill its aspirations, without diluting its social objectives.
Each of these drivers also growth. If the sugar sector is able to leverage these opportunities, it will be able to move towards its future growth. From the current state of being a large producer and consumer, with low participation in international trade and a low return on invested capital for most years, the sector could become a significant food and energy producer, with strong linkages with global trade. This can be achieved through self ufficiency in sugar and through investments in green by products like ethanol and cogen. The sector could also benefit from lower cyclicality and more sustained revenues. Fig. : Moving from Current to Future state All the opportunities discussed above offer varying levels of potential for future growth in line with the planned future strategies. Stakeholders would have to work in a collaborative manner, and need to be supported by an appropriate policy environment to tap these innovative opportunities. Fig. 4: Summary of Innovation Opportunities The above discussed opportunities have the potential to enable the sector to move owards its future growth. These opportunities could have varying degrees of impact on the sector due to their criticality towards achieving the growth and the value of the opportunity.
While some of these opportunities are currently being tapped, some of them are largely untapped and offer significant potential in the future. Fig. 5: Opportunity Matrix The following opportunities can be classified as innovative and transformational opportunities because they have a high level of criticality for achieving the future growth. These opportunities also have high value potential and are largely untapped by the sector as of now – Byproducts Productivity improvements While the domestic demand is critical and offers large opportunity, it is currently being addressed by the sugar industry.
Similarly, while product innovation is largely untapped, it is expected to be a relatively small opportunity since it is expected to be targeted at specific segments. The future policy environment would need to enable ‘V] PROCESS OF PRODUCTION OF SUGAR AND IT’S INNOVATIVE BY PRODUCTS FROM SUGAR WASTE To understand the green opportunities which are available in the sugar industry, first we need to understand how the sugar is produced and how the aste from this process is generated, which may be utilized as a raw material for these green product industries.
A sugar complex is a multi-product complex revolved around the sugarcane. The sugarcane is one of those agricultural commodities, which fixes maximum of solar energy per acre, releasing the same for human benefits in many forms therefore; the potential of a sugar industrial network should be harnessed fully. Cane leaves lop and tops during cane harvesting while manufacturing the sugar leaves bagasse, press mud (or filter cake) and molasses as waste products. The simplest concept of ugar industrial network is to use these wastes fully to make the network more sustainable and produce green innovative byproducts.
The whole sugar network is basically divided into two levels individually consist of various activities: 1) Farming of sugar cane (farm level activity) 2) Production of sugar & By-product utilization  1] FARMING OF SUGARCANE (FARM LEVEL ACTIVITY) Sugar cane is an essential commodity under the essential commodity act, 1955 as such the government is empowered to control its production, distribution and supply. The government regulates its supply to sugar factories under the sugar cane control) order, 1966.
The power of regulation of cane supplies has been delegated to the state government. Under the above order, the government is empowered to reserve the area for a factory having regard to the crushing capacity of the factory, availability of the sugarcane in the reserved area and the need for production of sugar; with view to enabling the factory to purchase the quantity of sugarcane required by it. The cane growers in the reserved area are required to enter into bond with the sugar factory for supply of specified quantity or percentage of sugarcane grown by him.
The growers are not allowed to supply cane to any factory outside the reserved area unless he obtained a permit for this purpose. The factory is also under the obligation to crush the entire cane which is bounded by the growers. TRENDS Now days most of the farmers diverted towards the sugarcane farming, this year in India the production of sugarcane are higher as compare to earlier. In recent years most of the farmers plant the sugarcane to make profit; it gives high yield/Acres of land which assures the good amount to the farmers.
OPesticides and chemical fertilizer are widely used in the sugarcane farm claimed to be the main reason why ost of the soil in the western Maharashtra and some part of Uttar Pradesh are facing problems like high pH, alkalinity, and decrease in the yield. OSugarcane is a water intensive crop, mostly planted in an area where water table is high and surface areas where the water table is low, farmer is practicing the drip irrigation. 2] PRODUCTION OF SUGAR & BY-PRODUCT UTILIZATION The second level starts when the collected sugarcane is then conveyed to the cane leveler where it is cut and chipped.
The cut cane blanket is then fed to tandem of mill, wherein it is crushed and the Juice is extracted. The sugarcane needs to process he cane as soon as possible to avoid the sugar losses. Typically, cane is processed within 24 hours after harvesting. The various steps involved in the manufacturing of sugar are as fallows: EXTRACTION OF JUICE: – The cane from the field is brought in bullock carts, tractors, trolleys, trucks etc. , which is then unloaded in the cane carrier by manual labour or mechanical unloader. It is then conveyed to the cane leveler where it is cut and chipped.
The cut cane blanket is then fed to tandem of mill, wherein it is crushed and the Juice is extracted. The extraction is actually conducted as a counter-current process using fresh hot water at ne end being pumped in the opposite direction to the cane. The more the water is used, the more is the sugar extracted but the more dilute the mixed Juice, hence the more energy will be require to evaporate the Juice. In many factories the cane is crushed in a series of large roller mills similar to a mangle [wringer] the sweet Juice is extracted.
Generally Juice looks pretty dirty, because contamination of soil particles from the fields, small fibers and the green extracts from the plant. Fig. 6: Sugarcane Juice extraction process There are several important aspects to extraction which involve the energy balance of he company, the efficiency of extraction and therefore ultimately the profitability of operations. The fibrous cane material after the extraction of Juice, called the bagasse goes to the boiler, wherein the same is burnt producing steam. The excess bagasse is baled and stored or can be sold to the paper industry.
CLARIFICATION: – The extracted Juices are then heated to 60-650C in Juice heater and passed to a reaction tank where the liming and sulphitation takes place. This limed and sulphited juice is pumped back to a ‘clarifier’ after heating to 1000C which remains there for about 3 hrs. During this stage in the clarifier, the heavy insoluble impurities, mostly soil and mud are precipitated which is then pumped to a vacuum filter which removes the liquid portion from the mud, while the solid muddy portion is taken out of the company building.
This waste is used as manure or can serve as raw material for the extraction of crude wax. BOILING: – The raw Juice is now clarified and is called the clarified Juice. It is then passed through a set of evaporator which boils the excess water under vacuum concentrating it gradually, as it passes from one evaporator to another. Finally rystallization takes place, under vacuum. The evaporation is carried out under vacuum. CRYSTALLIZATION: – A viscous solid mass consisting of sugar crystals and mother liquor is dropped in crystallizer and it then passes through the pug mills to centrifugals machines.
Due to very high gravity factor, the viscous mother liquor passes through the opening in the liner and the sugar is retained on the screen and the sugar is then dropped into the hopper. GRADING & PACKAGING: – The sugar is then passed on to a unit called grader, which grades the sugar in different grades and in different sizes as per the Indian sugar standards. The sugar is bagged in the pre-stamped empty gunny bags, weighed; the grades and number marked on the bags and these bags are stored in godowns and are finally sold. The transportation of sugar from mill to market is mostly carried out by road.
Though the Indian sugar industry is more concentrated in rural parts of India but it is well connected with most of the metropolitan cities of the country. BY- PRODUCT UTILIZATION:- The waste and by-product generated from the production of sugar are sent to the by- product based industry. The fibrous cane material after the extraction of Juice, called agasse goes to the boiler, wherein the same is burnt producing steam and electricity that powers the mill to process sugar from cane Juice and alcohol in distillery industry. The excess bagasse is baled and stored or can be sold to the paper industry.
Molasses, generated from sugar manufacturing finds its way to the distillery industry where it is use as a raw material to produce various industrial chemicals, alcohol, power biofuels. Alcohol is an important basic feed stock for manufacture of various chemicals. It is a good substitute for petrochemicals and petrol based chemicals in India. Waste material coming out of the sugar and distillery industry namely press mud and spent wash. Press mud is used as a filler material for bio-composting compost manure will be sold to the farmers. Anaerobic digester is used to process left-over effluent i. . spent wash and, to clean the wastewater which makes up 80% of the cane stalk to produce biogas, food grade C02, and fertilizer. Cleaned water is recycled for on-site use, sent back to the river or used to irrigate the cane farms. Like wise the network revolves around the sugarcane farm and plays the important role in the rural economy of the area. Thus, effectively managed through nvironmental point of view, Sugar network is a closed loop network, where all the waste from production process is utilized for the byproduct manufacturing.
TRENDS:- 0 Indian sugar industry sector is well organized and also associated with traditional cottage industry like Gur/Khandsari. Recently the fuel ethanol concept has been sugar factories which has started producing power alcohol. Government has now resolved that with effect from the year 2003, 5% ethanol-doped-petrol will be supplied in the following nine States including four contiguous Union Territories: States: Andhra Pradesh, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Tamilnadu, Uttar Pradesh, Chandigarh Union Territories: Damman and Diu, Dadra and Nagar Haveli, Goa, Pondicherry.
Most of the Clean Development Mechanism (CDM) projects are coming up in the sugar sector; as it has a huge potential for carbon credit. Most of the sugar industries are becoming self sufficient in terms of their energy requirement, and excess amount of energy is supplied to the grid. The following figure 7 shows how waste from sugar industry production network can be well utilized for production of green innovative products. Fig. 7: Sugar Industry Production Network V] GREEN INNOVATIONS IN SUGAR INDUSTRY The sugar industry is beginning to diversify into multiple by-products, to enhance the value addition for every MT of cane that is crushed.
The following fgure 8 gives clear picture about the green innovative by products from sugarcane. Fig. 8: Byproducts from sugarcane  1] BAGGASE Basic utilization of baggase continues to be as a fuel. Dry baggase contains 40% cellulose, 30% pentasone and 20% lignin. It is suitable raw material for paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered all over the country, collection of surplus baggase poses problem and makes paper units uneconomical. ] CO-GENERATION OF POWER-USE OF BAGGASE Baggase is used as captive fuel in the mill as power. Most efficient as well as balanced mills should be able to save baggase to the extent of 10% of its production. The potential for co-generation and export of power to the grid after meeting mills own requirement of energy is estimated by expert bodies, at 5000 MW by 2009-10. India has not exploited its huge potential like other countries like Hawaii, Mauritius etc. where co-generation of power from sugar mills has become a dependable source