Indian Sugarcane Sector - How to Ruin a Gold Mine - Lessons and the Way Forward?

Indian Sugarcane Sector - How to Ruin a Gold Mine? Lessons and the Way Forward.

By:

Vijay Sardana

For updates : @vijaysardana

Do share the blog and your views.

Are we really keen to solve sugarcane sector crisis in India?

This is a classic case how bad politics can ruin a gold mine and create a crisis for all and worst part is no political leader had guts to change the bad policies hurting all. Unfortunately, those who suffer the most are also not keen to learn the new ways of working.

The way our stakeholders are working it sends a message that we are not keen. Government is not willing to accept that there is serious policy flaw in our system driven by political consideration. Sugar Industry is not keen to do any work on new products even in good time and in bad times waiting for bailout packages in the name of farmers. Farmers are not keen to change because they are fully aware and confident that political class will come for votes and will offer bailout package. These shortsighted approaches of all have ruined the national economy at many levels and we all are party to this crime with no exception.

Defective Diagnosis of the Problem:

The national resource is sugarcane, not the sugar. So focus on sugarcane, not on sugar. Sugar is the output or outcome of the processing of sugarcane. If we address the sugarcane as the resource we can have the answer to the problem. Sugar sector is just one product which can be produced from sugarcane. More profitable and lucrative business models exist but policymakers and investors not keen to explore them because these will shake-up their existing short-cut ways of operating for profit and vote banks.

Most business leaders are operating with the outdated concept and approaches - many are still in commodity trader mindset - they what to earn but don't want to invest and upgrade to compete. This needs to be addressed by bankers and credit rating agencies.

Do we have technologies ready to commercialize from IITs, CSIR and ICAR laboratories working on these products? When we know Sugarcane is major biomass in India, why no efforts were made to develop world-class production technologies for value-added products in India. 

Major countries are not keen to share technologies with India to make India their competitor. Who are the decision makers of research projects of these institutions? They should be asked to disclose the logic of their research priorities to the public if they are using taxpayers money for research. 

Sugarcane sector can have bright future provided we are keen:

According to the author, in agro-economy and bio-economy, the concepts such as biorefinery and green chemistry focus on the usage of biomass, which is the outcome of various agriculture and related activities.  If understood properly, it causes the less negative impact on the environment and can improve the income of farmers substantially. This needs out-of-box thinking and many existing laws and industries may need restructuring. From mindset point of view - we must move away from the commodity mindset to product mindset.

A biorefinery based on sugarcane (Saccharum spp.) as feedstock is an example because it can integrate into the same physical space what crude oil is used for - processes for obtaining biofuels (ethanol), chemicals (from sugars or ethanol), electricity, and heat.

The use of sugarcane as the feedstock for biorefineries is dictated by its potential to supply sugars, ethanol, natural polymers or macromolecules, organic matter, and other compounds and materials. 

By means of conversion processes (chemical, biochemical, and thermochemical), sugarcane biomass can be transformed into high-value bioproducts to replace petrochemicals, as a bio-economy model. 

Value Addition is the only option to recover the cost, the profit, and the taxes:

A biorefinery that supplements its manufacture of low-value biofuels with high-value biobased chemicals can enable efforts to reduce nonrenewable fuel consumption while simultaneously providing the necessary financial incentive to stimulate the expansion of the biorefining industry. However, the choice of appropriate products for addition to the biorefinery's portfolio is challenged by a lack of broad-based conversion technology coupled with a plethora of potential targets.

Can we learn from other countries:

In 2004, the US Department of Energy (DOE) addressed these challenges by describing a selection process for chemical products that combined identification of a small group of compounds derived from biorefinery carbohydrates (read sugarcane included) with the research and technology needs required for their production. 

There is considerable progress has been made in the use of carbohydrates as starting materials for chemical production. The list is developed and a dynamic guide to technology development that could realize commercial success through the proper integration of biofuels with biobased products was released.

Consider Sugarcane as biomass and change the laws:

The cost of ethanol production from sugarcane is US$30−35 per barrel of oil equivalent, much lower than the cost of US$50−55 per barrel based on corn.

Sugarcane contains about 70−75% water, 11−16% sucrose, and 10−16% fiber. Sugarcane processing begins with the extraction of cane juice by mill tandems, leaving behind bagasse, the fibrous material that is sent to the lignocellulosic processing to produce ethanol or chemicals or sent to the boiler house to generate electricity or steam. 

Most of the sugar juice is used to produce sugar by purification and crystallization. The molasses by-product from sugar processing and some of the sugar juice are used to produce ethanol. Sugar, fuel ethanol, and bagasse are the main products in the sugarcane biorefinery but low in value. Further processing and value-added products are the way out.

Sugar can also be converted into valuable chemicals such as poly(3-hydroxybutyric acid) (PHB) by fermentation. Integrated production of PHB, sugar, ethanol, and energy can improve the viability of the processing operations. 

Bagasse, the lignocellulosic by-product from sugar extraction, is usually burned to generate steam and electricity. In an integrated sugarcane biorefinery, bagasse can be treated to release more sugars that can be further converted to fuels and chemicals to generate more values.

Also, an integrated first- and second-generation ethanol production plant would have better economic returns compared with the stand-alone plant.

The way forward for sugarcane sector:

Eat less sugar is the health theme nowadays: The Political class and policymakers must appreciate that every year this sector will go thru crisis because all medical doctors are advising consumers to reduce sugar intake. 

Sugar Act and Essential Commodity Act needs relook: Are we still in the confused whether India is a sugar surplus or sugar deficit country. If there is a clarity on this, why we have laws which are not addressing the reality and hurting the investment. This will open new application of sugarcane as biomass. Are we saying policymakers are not in touch with reality?

Should there be any link between raw material and finished goods consumption and prices: Let policymakers ask any economist and technocrat, if there is any confusion. If yes, the government should also fix minimum release price for the sugar in the market. If they are not keen, in that case, why they were keen to do that for raw material prices. What this indicates - do we have sensible policy planners to run this large economy. Should they not be made accountable for ruining the national economy?

India is part of WTO advocating benefits of the free market system but not keen to have marketing reforms within the country: Indian policymakers are supporting cartelization in every aspect of agriculture and food economy. All laws and policies are designed to restrict free trader and fair competition. These restrict create inefficiencies and promote rent-seeking mindset at all levels. This rent collected from all sides are used in political activities outside the tax system and outside any accountability and transparency. So, whenever you hear from any policymaker saying we care for farmers, this is nothing but a joke of that day. Ask them what they are doing to bring marketing reforms and by when. If there is no clear deadline, this clearly indicates they are not keen, beyond lip service.

Enforce Mandatory ethanol blends up to 20% in automotive fuel: Indians largest import is fuel oil. Why we are keen to send money out in place of paying to farmers, those who can supply sugarcane for ethanol production. Any logic? It seems someone is benefiting from the imports of petroleum products within India and do not want India to improve ethanol production.  Our leaders also surrender to this pressure and not taking the clear stand on ethanol blending. It is important to ask this question who is this influential agency more powerful than Prime Minister of India or Cabinet of India. In days of shortage of sugarcane, this order can be temporarily revised. All Oil Marketing companies are PSUs, they can always extend the support for blending.  
Challenge: The only problem I can see is from Finance Ministry - it may not be keen because they may lose excise duty. Pennywise and pound foolish approach exist - willing to pay subsidies and willing to write-off debts but can't help businesses to perform. Pilferage can be controlled by better application of technology and asking PSUs to take-stake in ethanol manufacturer and supplier to PSUs and have seat on the board's audit committee or as the observer.

Researchers must develop technologies for national challenges: 

Ask all Research agencies using tax-payers money to develop following technologies in the shortest possible time. They should be rewarded for technology development.

Proposed timeline :

Provided there is "the political will" at the highest level to address the sugarcane crisis forever (if policymakers need help, I am available to help in the decision-making process within the timelines proposed) -

1. The decision to blend ethanol in automobiles fuel can be taken in 07 days after considering all ifs and buts.

2. Revision of Sugar Act, Essential Commodity Act and other related Acts affecting sugar sector can be revised in 30 days, after considering all ifs and buts. This can be done through ordinance also to convey political will.

3. APMC and all other laws hurting investment in sugar bio-refinery can be done in next 3 months. 

4. All R&D centres must be given the task to bid for research grants, so that best brains can come forward, to deliver on research agenda for new products from sugarcane. If Industry is not keen to contribute, the taxes on sugarcane-based industries can be used to recover the cost of research, if required.

There can be many small and big suggestions, all can be considered before coming-out with final policy but please do in time bound manner. 

Everything else can wait, neither season or time nor the agriculture/farmers' hardships.

But the political wisdom says, don't address any problem in advance, there will not be any political mileage because voters will not remember your contribution. So, let the crisis aggravate and let there be crisis all over, let everyone faces the heat and then address the problem and take the credit for solving the problem and blame others for causing it. That is why in Indian democracy system, please wait for the crisis to happen, the solution will follow. So, in whichever sector you want reforms in India, please create crisis first. If you want early action, create crisis early. We are reactive society, not proactive society.

I am not joking see the history of last 70 years, including last 4 years. Nothing has changed.

Have patience.