Supply chain system of sugar

industry














Introduction
India has been known as the original home of sugar and sugarcane. Indian mythology
supports the above fact as it contains legends showing the origin of sugarcane. India is the
second largest producer of sugarcane next to Brazil. Presently, about 4 million hectares of
land is under sugarcane with an average yield of 70 tonnes per hectare.
India is the second largest sugar producer in the world (after Brazil), accounting for around
10-12% of world`s sugar production. The Indian Sugar industry started growing in an
organized way during the 1930 after introduction of the sugar industry protection act in 1932.
Sugar is India`s second largest agro-processing industry. India`s sugarcane cultivation area
accounts for 2.7% of India`s cropped area. Sugar industry accounted for around 1% of GDP
of the country during FY2005. Further, sugar industry contributes an estimated Rs 17 billion
annually to national exchequer and treasuries of various state Governments by way of excise
duty and purchase tax on Sugarcane. Sugarcane farmers and their families number over 45
million, constituting about 7.5% of the rural population. The sugar industry employs 0.5
million workers and also provides substantial indirect employment through various ancillary
activities.
History: The discovery of sugarcane, from which sugar as it is known today, is derived dates
back thousands of years. It is thought to have originated in New Guinea, and was spread
along routes to Southeast Asia and India. The process known for creating sugar, by pressing
out the juice and then boiling it into crystals, was developed in India around 500 BC.
Its cultivation was not introduced into Europe until the middle-ages, when it was brought to
Spain by Arabs. Columbus took the plant, dearly held, to the West Indies, where it began to
thrive in a most favourable climate.
It was not until the eighteenth century that sugarcane cultivation was began in the United
States, where it was planted in the southern climate of New Orleans. The very first refinery
was built in New York City around 1690; the industry was established by the 1830s. Earlier
attempts to create a successful industry in the U.S. did not fare well; from the late 1830s,
when the first factory was built. Until 1872, sugar factories closed down almost as quickly as
they had opened. It was 1872 before a factory, built in California, was finally able to
successfully produce sugar in a profitable manner. At the end of that century, more than thirty
factories were in operation in the U.S.
Global Sugar Scenario:
Sugar is produced in around 122 countries across the world. It is extracted from two different
raw materials, sugarcane and sugar beet. Sugarcane is cultivated under tropical climates,
while sugar beet is grown in high temperate regions. Around 78 per cent of the sugar
produced in the world is created from sugarcane, with beet sugar accounting for the rest. The
choice of sugarcane or sugar beet for sugar production is influenced by weather conditions,
crop diseases, soil quality, international trade agreements and domestic price support
programmes. The cost of producing sugar from cane is less than the cost of producing from
beet. Of the 122 sugar producing countries, 67 produce sugar from cane and 55 from beet.
The top ten sugar producers account for 77% of global production which was 169 million
tons in 2007/08.The figure No.3 is self-explanatory and offers ample scope for reducing the
cost of sugar production in India as compared to South African countries and Brazil. [19]


Indian Sugar Scenario:
In India, sugar industry is the second largest agro processing industry after textiles and
mainly located in the rural areas. In this industry, mainly farmers and labours are highly
involved in various activities like harvesting, cultivating, loading-unloading of canes and
ancillary. This industry provides huge employment opportunities to skilled, semiskilled
workers, and others of rural regions. Indian sugar industry contributes almost Rs. 22.5 billion
to the state and central government in form of tax and excise duties per year. In fact, this
industry generates electricity for its factory work but export surplus of power to the grid. In
India, the total number of registered sugar mills is 819 and number of factories running in
operation is 778 as on March 2006. The maximum numbers of sugar mills are found in Uttar
Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh. In India, Uttar
Pradesh and Maharashtra are the largest state in India where the sugar mills of government,
private and public sectors are spread all over the regions of the state. India has around 45
million farmers growing sugarcane, 600 sugar factories producing about 20 MT of sugar for
1.21 billion consumers as per year 2008-09. These figures make India largest consumer of the
sugar in the world as per USDA foreign Agricultural Service and it also explains Indias
fifteenth position in sugar exporting nations list. In March 2009, the sugar consumption was
22.5 million tonnes from the total supply of sugar was 35557.86 thousand tonnes which is the
highest during the last ten years. According to the USDA Foreign Agricultural Service, sugar
production will increase by 27 per cent with an aggregate volume of 24.7 million tonnes of
sugarcane production- Indias marketing year (MY) 2010/11 (October-September). The total
sugar exported from India was 3331997 tonnes (worth Rs 444874.3 lakh) and the total import
in India was 386095 tonnes (worth Rs 58310.86 lakh) in March 2009. Due to the large
domestic consumption of sugar in the country, the export figures have not been significant.


Supply chain system of sugar industry





Inbound Logistics
The farmers perform various farming activities like harvesting, cultivating, irrigating and
ploughing in the production of cane and then transport to the mills. There are various
government agencies have opened call centres for supporting farmers in sugarcane
production. Mostly sugar mills also help farmers in their farming activities by providing high
yield seeds, fertilizers, pesticides, knowledge, and other relevant nutrients. But sometimes,
farmers buy their seeds from the market. The cane societies are also highly involved in
supporting the farmers in their field work.

Cane Management


In India Almost all sugar mills depend for their supplies of sugar cane on large number (5000
to 25000) of independent farmers. The sugar cane harvest is a complex logistical operation
that involves the cutting and loading of cane in the fields, the transportation to the factories
and the unloading of the cane in the factory. Each sugar factory has a number of teams, which
cut cane with hand (Manual harvesting) in order to meet a daily quota. Sugarcane cutting is a
hard and dirty job, but provides employment to people in nearby areas where jobs are scarce.
Sugarcane is cut at about ground level, the top green leaves are chopped off and then the stalk
is bundled. Once a complete bundle has been assembled, it is removed from the field with the
help of labourers and transferred to a larger vehicle for transport to the mill. Then, depending
on the quota for a particular day, resources such as Bullock Cart, tractors and trucks are
assigned. The harvested sugar cane should be crushed within 8-12 hrs. to get a good recovery
of sugar.


Operations in the sugar mills
The sugar mills produce sugar from cane in four stages such as receiving of cane from
farmers, crushing the cane, processing for sugar production, and finally packing of sugar
according to their sizes i.e. Small,Medium and Large.



Detailed Process:
The processing of sugarcane takes place with the help of heavily equipped machinery
assembled in the sugar mills. At the initial stage of the process, the sugarcane is lifted with
the help of crane under the supervision of supervisors or millers. The lias, cutter, chopper,
and hybridizers are inbuilt under this crane. After this, the sugarcane passes through the
milling and then sent to the boilers. In boiler, the sugarcane burns around 51 to 50 Motions
bagasse or dry dusty pulp. Some of the bagasse burns in the boiler as per required by the
sugar mills for using such. The remaining or extra amount of bagasse will go further in the
mill process. This extra bagasse can be purchased by the paper plant and power plant as per
use by their requirement. Therefore, the juice is extracted which further needs heating.
Hence, for heating the juice, the amount of steam is required around 160 to 165tonnes per
project or plant. The steam is produced with the help of boilers and turbines. For producing
the extra amount of steam, the boosting is required with the help of turbines. This whole
process cannot be operated or run without electricity. Generally, every sugar mills must need
electricity to run the fitted machines for extracting sugarcane to juice and juice to sugar in the
sugar mills. Therefore, sugar mills have their own power plant from which they generates
around 22 MW electricity on crushing the sugarcane. Now, after heating the juice, the dirt
from the juice gets removed. This is the cleaning process at the primary stage where the
cleaned juice and mud will get separated. Further, the cleaned juice proceeds to the
evaporation section which removes water from it. Hence, after removing the water from the
cleaned juice, the millers dilute sulphur to it and then bleaching process takes place. After
cleaning process, the cleaned juice will goes further to pine station for developing grains
(Cheeni).Now, these grains pass through the centrifuges machine to separate the pure sugar
and molasses. Therefore, pure sugar goes to sugar weighing machines for sealing the sugar
into 50 to 100 Kg per jute bags. The sugar bags will be sent finally to the godowns of sugar
mills for storage purpose. During the processing, around 30% of molasses are produced and
the storage stand is used to store the molasses in the mills. The government releases the order
for selling the sugar and molasses in the market. The molasses have around 20 to 30 by-
products namely shampoo, toffees, medicines, alcohols, chemicals, etc.

By-products and sustainable inputs to industries

1) Sugarcane as a raw material used for processing in the sugar mills to produce sugar and
other by-products.
2) Sugar is the main product which is obtained from the sugar industry and is distributed in
the market.
3) Bagasse as a by-product obtained during mill processing and used for generating steam
and power plant projects. This by-product is easily consumable by the brick industry as a fuel
and used in making papers in paper mills. This helps farmers and cane society to feed their
cattle.
4) Mud as a by-product also obtained during mill processing and used for soil conditioner,
manure, and valuable source of nutrients. This helps farmers to provide proper nutrition to
their crops.
5) Molasses as a by-product obtained during mill processing and used in distillery for making
alcohols, acids, industrial chemicals, etc.
6) Power is generated from bagasse during the mill processing which is used in the boiler to
generate steam and sold out to the state electricity boards.
7) Ethanol is produced from molasses during the mill processing. This alcohol is well
purified again to form fuel grade ethanol which can be mixed with the petrol. This purified
ethanol is used in vehicles, airlines, etc.
8) Bio-fertilizers are obtained from the mixture of the residue product during mill processing
operation with the chemicals.

Bagasse - a light-weight and highly inflammable commodity
Sugarcane crushing leads to a fibrous residue called bagasse. Dried bagasse is a highly
inflammable commodity and is also very light in weight. Therefore, it is watered to prevent it
from catching fire as well as being scattered. It is stored in the form of piles/ stacks, and used
whenever required in the sugar complex.
Bagasse

The fibrous residue of sugarcane, after it is crushed in a sugar mill, is called bagasse. The
residue contains 40-50 per cent moisture. Dried bagasse contains 70-75 per cent cellulose and
about 20 per cent lignin, which makes is highly inflammable. It is also light in weight and can
get easily scattered by the wind.
Bagasse can be stored for 8-10 months. It is usually stored in the form of:
Huge piles, which are watered to prevent scattering
Stacks of rope-tied bales
Bagasse storage area along with a sugar complex

When bagasse needs to be burnt to generate heat inside a power plant's boiler, it is dried to
remove water and moisture before being transported to the sugar complex.

Electricity Act 2003 : bagasse-based power generation
Prior to 2003, domestic sugar mills used bagasse primarily to generate power for their captive
use. The surplus bagasse was sold as companies having captive power plants were not
allowed to sell surplus power. Electricity Act 2003 permitted sale of power by captive plants
either to SEBs or through open access thus changing the landscape for captive power users in
the country. The sugar industry also witnessed a surge in bagasse based co-generation
capacity post 2003 resulting in increase in generation of bagasse based power.
Prior to 2003, companies having captive power plants in India were not allowed to generate
and sell surplus power. Consequently, the sugar industry utilised bagasse only to the extent
required for generating power to meet captive use. The surplus bagasse was sold to other user
industries. The processes to generate power were also inefficient resulting in lower plant load
factors (PLFs) and plants operated for a shorter duration.
Electricity Act 2003 permitted captive power plants to generate and sell the surplus power
generated to the state electricity boards (SEBs) or merchant power through open access.
Consequently, there was a spurt in bagasse-based co-generation capacity, as a number of
sugar mills added new capacities as well replaced older capacities for better technology.
Trend in surplus bagasse based power generation capacities in key sugar states (MW)

On an average, bagasse would account for 70-75 per cent of the above capacities, across the
years.
All major sugar producing states witnessed healthy capacity additions in bagasse-based
power generation over the last few years. CRISIL Research's sample set of 30 sugar
companies, spread across the country, added close to 1,200 MW of capacities from 2005-06
till 2010-11.
The surplus power generated by sugar mills is mainly sold to SEBs through power purchase
agreements (PPAs). Sugar companies refrain from selling power on merchant basis as selling
through open access poses risks such as penalties in case of lower power supply (which can
occur during times of low sugarcane production).

Cost of power generation cheapest through bagasse
Power generation through bagasse is the cheapest among all major energy sources in India.
However, the potential power generation remains low at 9-11 GW. Ministry of New and
Renewable Energy projects capacity additions to the tune of 1.35 GW over the next 5 years.
It is believed that the pace would be faster and around 1 GW of capacities would be added
over the next 2 years entailing investments of Rs 50 billion.
The cost of power generation through bagasse is the cheapest among all energy sources in the
country at Rs 1.1-1.3 per unit. This excludes the opportunity cost - calculated as net of
revenues from selling entire bagasse produced, and purchase of power for running the
integrated sugar complex. If the opportunity cost is included, the cost of generation would
range between Rs 2.4-2.6 per unit.

Cost of power generation via various energy sources


Outbound Logistics and Distribution

The sugars that is stored in their mill godowns is then distributed to the wholesalers as
ordered by brokers or private agents. The wholesalers store the ordered sugar for further
distribution to their area retailers and finally to the consumers. Mostly consumers (indirect
customer) like levy (PDS- Public Distribution System and BPL-Below Poverty Line),
military, institutional customers (airlines, shopping malls, railways, food companies, etc), and
other countries order sugar directly from the mills and/ or wholesalers. Near about 60%
indirect customers order sugar directly from wholesalers.

References

1. Green Supply Chain Management: A Case of Sugar Industry in India Rupesh
Kumar, Vishnu Nath, Dr. Rajat Agarwal, Dr. Vinay Sharma.

2. Inbound Supply Chain Methodology of Indian Sugar Industry R.S.Deshmukh,
N.N.Bhostekar, U.V.Aswalekar, V.B.Sawant.

3. www.crisilresearch.com