2. Current Scenario in Sugarcane Farming in India

India’s domestic sugar market is in peculiar condition as international sugar price continuously falling while the cost of sugar production and market price is higher in India, which makes it difficult for India to sell in the international market. While India’s sugar production is continuously growing and predicted to hit all time high at 34.2 million tons production. The major challenges are:

• Higher cost of production and water use

• Unsustain growth of sugar production

• Higher cane price versus lower sugar price in market

• Pilling-up dues to farmers and government need to announce subsidy

• Significantly higher production as compare to domestic demand

3. Sustainable Sugarcane Cultivation

Sustainable Sugarcane Initiative (SSI) is a much-needed in present condition given the fact that ground water and rainfall level are deteriorating continuously and sugarcane production need much higher rate of irrigation. As Maharashtra and Western Uttar Pradesh produce a higher amount of cane, availability of water has significantly reduced over the years in these regions.

SSI cultivation could be game-changer if it is adopted in a scientific way, which will reduce the natural resources use, fertiliser application and a significant increase in production

3.1 Brief overview of SSI

SSI is a method of sugarcane production, which involves using less seeds, less water and optimum utilisation of fertilisers and land to achieve more yields. Driven by farmers, SSI is an alternative to conventional seed, water and space intensive Sugarcane cultivation.

The major principles that govern SSI are:

• Raising nursery using single budded chips.

• Transplanting young seedlings (25-35 days old).

• Maintaining wide spacing (5X2 feet) in the main field.

• Providing sufficient moisture and avoiding inundation of water.

• Encouraging organic method of nutrient and plant protection measures.

• Practicing intercropping for effective utilisation of land.

Comparison between conventional farming and SSI

SSI follows improved cultivation practices. Instead of planting large number of seeds/setts directly on fields, SSI[1] recommends to grow buds in a nursery and thereafter, transplant plant young seedlings (25-35 days old) on the field.

Due to this practice, the better growth of plants is ensured. Increased spacing (5 ft between rows) enhances scope of intercropping and also plant obtains abundant sunlight, moisture and nutrients. It results into a large number of tillers, almost two times than the conventional method. Selection of healthy seedling, nurturing them in nursery and availability of sufficient nutrients and water in SSI makes plant healthy and reduces mortality of plants across various stages from transplantation to full grown plant. The differences in cultivation practices between conventional farming and SSI is illustrated in the below table.

Note: SSI is a package of practices (PoPs) as defined in the ICRISAT-WWF Project, However, promoting SSI required customise modification and changes as per the need of local geography. It should be promoted as a Climate Smart Sugarcane Initiative with developing special PoPs based on local geographic needs.

Source: Training Manual on Sustainable Sugarcane Initiative: Improving Sugarcane Cultivation in India, an Initiative of ICRISAT-WWF Project, ICRISAT.

4. SSI & Umbrella Programme for Natural Resource management (UPNRM)

The National Bank for Agriculture and Rural Development (NABARD) in collaboration with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and German Development Bank (KfW4) is implementing the Umbrella Programme on Natural Resource Management (UPNRM) for funding community managed natural resource management (NRM) based rural livelihood/ development projects. Under this programme, GIZ is supporting NABARD in developing innovative and pro-poor financing mechanisms with a view to augment private financial resource flows in the natural resource management and agriculture sectors as well as to improve the efficiency of implementation.

UPNRM comprises two closely linked components. The first supports the development and marketing of new financial products that are primarily credit-based. The second component supports forging systematic public private partnerships between rural producer organisations, the private sector, NGOs and NABARD in selected regions.

The program envisages a gradual shift from grant based to loan based NRM projects and funding through a corpus comprising financial cooperation from KFW as well as fund mobilised by NABARD from various sources.

Till March 2017, NABARD has sanctioned around 325 project proposals submitted by various implementing agencies, which in the context of UPNRM are called Channel Partners (CP). Currently, CPs that are implementing UPNRM supported projects which include NGOs, cooperatives/producer companies, Micro Finance Institutions (MFIs), corporates and one state owned enterprises. These different types of organisations, however, bring various levels of staff competencies, a range of organisational structures as well as differing financial and management procedures.

Under UPNRM, SSI in Maharashtra and Bihar is undertaken with primary support to sugar cooperative in Maharashtra and non-profit channel partner in Bihar. The primary purpose under SSI is to use drip irrigation and POP to promote sustainable sugarcane cultivation. The entire project is promoting sustainable sugar farming with a marketable financial model for a small and marginal farmer to migrate from water reach practice to less natural resource-driven farming. Under UPNRM, NABARD has sanctioned INR 17 cr as assistance covering 1800 ha of sugarcane farming to six good sugarcane cooperatives and one project in Bihar involving 200 farmers and 200 acres which later scaled to 1000 farmers after initial success.

5. Methodology Adopted

Based on RFP and existing documents on SSI promotion under UPNRM project, ACCESS team has carried out a thorough desk review. The survey instrument was developed for collecting cost economy data related to SSI farmers. Data collection instrument was finalised after getting feedback from expert and GIZ team.

The data collection was done in consultation with Indian Rural Association (IRA) - channel partner for the Bihar under UPNRM. A convenient sampling from total 200 intervention farmer and direct one to one data collection from 15 farmers conducted. A Focus Group Discussion (FGD) was held with IRA & Sugar Factory Management.

Based on data collection and technical expert’s observation, final costing was derived. The detail costing table has been incorporated in the report and the survey instrument attached in Annexure 1.

6. Climate Adaptation and Risk Management Aspect

India is the world’s largest consumer of sugar and the second largest producer after Brazil. However, sugarcane is highly water intensive and recent years have witnessed significant droughts.

Groundwater levels are plummeting and there is immense pressure on available water resources. Water scarcity has led to reduced sugarcane yields.

Climate Smart Agriculture practice has a package of agronomic practices which emphasises water efficiency, improved productivity and reduced production costs. These include methods such as trash mulching, composting, wide planting, intercropping, bio fertiliser application, and nutrient and pest management. Surface and subsurface drip irrigation is an important element of the intervention.

7. UPNRM SSI Bihar Intervention: Indian Rural Association (IRA)

IRA, the channel partner has been provided with a loan and grant support for promoting SSI under UPNRM. The entire intervention has a positive impact on productivity and sugar recovery. The uptake of drip irrigation was not seen much at this stage as a general perception about abundant availably of water in the region. Also, there is ample scope for awareness about water conservation and adoption of drip irrigation methods. The major intervention during the project period was:

• Bud-chip method and nursery preparation for seedling

• Improved verities of sugarcane

• Use of bio-fertilisers

• Wide Row-Spacing and Intercropping

7.1 Impact:

IRA has covered 200 farmers under the first phase and given the benefit of the project, it has cascaded to 1,000 farmers. The local Sugar factory in Hasanpur has widely acknowledged productivity enhancement and improved sugar recovery due to SSI intervention.

7.2 Financial comparison on cost associated with SSI Bihar

Bihar only represents 5% of land area covered for sugarcane cultivation in India but given the water and climate suitability, there is multiple possibilities of promoting sugarcane through SSI[1]. In Bihar, there are 11 private sugar factories with a limited catchment of sugarcane production.

Under the UPNRM, IRA has promoted some aspect of SSI cultivation with the main focus on the bud chip method for nursery raising and a better variety of cane. The intervention has led to a reduction in chemical fertilisers, relatively less water use and use of bio-fertilisers. The main benefit was in significant improvement in productivity.

The farmers have realized 25% to 40% improvement in productivity through the intervention.

Some major benefit to farmers

• Higher germination percentage

• High number of millable canes

• Increased water use efficiency

• More accessibility to air and sunlight

• Reduction in cost of cultivation

• Extra income from intercrops

8. Sugarcane cultivation in Bihar-Detail Costing

COST OF SUGARCANE PRODUCTION - Bihar
	PER ACRE CALCULATION		PLANT CROP						RATOON CROP
			Climate Smart Agri (CSA)			Conventional			CSA			Conventional
Sr. No.	Particulars of Operation	Unit	Qty	Unit Cost	Total	Qty	Unit per cost	Total	Qty	Unit Cost	Total	Qty	Unit per cost	Total
A - 1	Preparation of Land	Nos		720	720
	a) MB Ploughing :-         Deep	Nos		1000	1000	1	2500	2500
	b) Cultivator :-					2	1800	3600
	c) Rotavator	Nos		960	960	1	1750	1750
	Planking			240	240	1	600	600
	c) Formation of Trench/ Furrow	Nos				1	1500	1500
	d) Preparation of Field & Field Channel for trans/Planting	Labour
					2920			9950
2	Cost of Seed/ Seedling
	a) seed Material	Qtl	5000	2.25	11250	32	315	10080
	b) Transport Charges	Trip	3	500	1500	2	500	1000
					12750			11080
3	Planting of Sugarcane
	a) Cleaning, Spreading & Planting	Labour	1	2000	2000	6	200	1200

9.Impacts of SSI Intervention

Social:

The project introduced a new scientific technology for cultivation of sugarcane and acceptance among farmers on the adoption of new technology has improved.

• Adoption of new sugarcane cultivation practice and wider dissemination

• Due to wider spacing, intercultural operation becomes easy, thus reducing the drudgery among women laborers.

• Adoption of farm mechanisation techniques

• New livelihood opportunities/entrepreneurship for seedling preparation

Climate:

• Soil and water conservation due to wide spacing and nursery-based seedling

• Reduced electricity and diesel pump usage (due to reducation in irrigation water demand as Drip irrigation and Furrow Irrigation practices)

• Reduced stubble burning due to mulching – Lower Green House Gas emission

Financial:

• Higher productivity and profit realisation to farmers

• Small land holder doing diversified agronomic activity with intercropping

• Sugar mills realising higher recovery on SSI led intervention

10. Scale-Up and Finance Potential

In India, more than 80 million people is associated with sugarcane directly or indirectly making it one of the major agriculture economy. In recent times, due to deteriorating natural resources, it has become increasingly necessary to promote climate resilient way of cultivation.

Bihar has 2.43 Lakh Ha area under sugarcane cultivation. For promoting drip led irrigation practice at an average per hectare cost of INR 1,00,000/-, Bihar having finance potential in tune of INR 2,430/- Cr.

For promoting Seedling entrepreneur, there is potential to have more than 6000 entrepreneurs and financial potential of more than INR 1200 Cr.

11. Finance for Promoting SSI

SSI has a significant positive impact on the environment, productivity improvement and higher recovery for the sugar mills. It’s high time that SSI should be promoted on a larger scale and present gap funding need to provide for SSI farmer. The following are the potential way of finance and the possible role of different agencies.

11.1 Bank/Financial Institution

SSI cultivation has significant commercial viability and profitability. A special finance scheme needs to be developed in partnership with banks, sugar mills and SSI farmers. An SSI loan requirement is higher than KCC (Kisan Credit Card) limit for sugarcane cultivation and it needs to be considered during the discussion with banks[1]. Bank may come-up with SSI finance model at market rate with the partnership of Sugar Mill and other direct security by the farmer.

11.2 Government

The government could play a catalytic role in promoting SSI through direct subsidy on drip-irrigation, seedling or credit guarantee for SSI finance. The various state government is providing drip-irrigation / seedling subsidy on different scale which can be recalibrated for promoting SSI as a holistic model.

11.3 Sugar Mills/Cooperatives

Sugar mills are the key stakeholders in the entire value chain. The SSI promotion leads to better millable cane and higher recovers which makes excellent business case for sugar mills. Sugar Mills could provide incentive for adoption of SSI practice and higher cane price as compared to conventional practices.

• Subsidy/Incentive to farmers for adopting drip-irrigation

• Providing high quality Seedling at subsidies rate

• Partnering with Banks/Financial Institution for providing loan to farmer and acting as a guarantor

11.4 NABARD/Development Institutions

NABARD, GIZ, WWF, IFC and ICRISAT have promoted SSI on a different scale and provided critical technical support. In states like Bihar where Sugarcane cultivation is limited but a favorable condition for growth need to be explored and more SSI led bigger pilot with multiple stakeholders needs to be carried out.

• Promoting a bigger scale project on SSI

• Partnering with government/sugar mills for SSI promotion

• Bringing ecosystem partner like finance institution/private mills for collaborative efforts

11.5 Potential Banks/Financial Institution for promoting SSI

12. SSI with Drip Farmers Loan Bihar

12.1 SSI with Drip Farmers Loan Fact Sheet

Project Cost:

12.2 Financial Calculation for Project viability of Drip led SSI cultivation

1. SSI Method with Drip

2. Financial Analysis for Drip-irrigation led SSI method of Sugarcane cultivation

12.3 Financial Indicators

Internal Rate of Return (IRR):

The project internal rate of return should be more than 15% as per the current financial scenario of the country. The project IRR is 48.5% therefore it is clearly indicating that the project is feasible for investment.

Payback Period:

The Payback period for the project is 1 year and 11 months. It should be less than 4 to 5 years therefore the project payback periods are within the limit.

Net Present Value:

With a discount rate of 10% and a span of 5 years, the projected cash inflows are worth .INR 4,88,338. Today, this is greater than the initial cash outflow of INR 2,31,280. This resultspositive NPV of the above project is Rs. 2,57,058 which indicates that pursuing the above project may be optimal with BCR of 2.11.

13. SSI without Drip Farmers Loan Bihar

13.1 SSI with Drip Farmers Loan Fact Sheet

Project Cost:

Means of Finance:

13.2 Financial Calculation for Project viability of without Drip led SSI cultivation

1. SSI Method with Drip

2. Financial Analysis for Drip-irrigation led SSI method of Sugarcane cultivation

13.3 Financial Indicators

Internal Rate of Return (IRR):

The project internal rate of return should be more than 15% as per the current financial scenario of the country. The project IRR is 89.5% therefore it is clearly indicating that the project is feasible for investment.

Payback Period:

The Payback period for the project is 1 year and 1 month. It should be less than 4 to 5 years therefore the project payback periods are within the limit.

Net Present Value:

With a discount rate of 15% and a span of 5 years, the projected cash inflows are worth Rs.4,25,988. Today, this is greater than the initial cash outflow of Rs. 1,87,802. The resulting positive NPV of the above project is Rs. 2,38,186 which indicates that pursuing the above project may be positive optimal.

14.Seedling Entrepreneur Business Loan

SSI promotion involves multiple levels of intervention and for scaling up its adoption, preparation of high quality single bud seedling method is an essential component. The preparation of seedling and selling into the market itself becomes an independent business activity. The entire activates provides multiple employment opportunities in surrounding and required substantial capital. Providing affordable finance becomes an important aspect of promoting SSI and subsequently scaling it up. Here we proposed detail Seedling entrepreneur promoting, the cost associated with it and different financial matrix for business viability.

14.1 Seedling Entrepreneur Loan Fact Sheet

Project Cost:

Means of Finance:

14.2 Financial Calculation for Project viability of Seedling Entrepreneur Business

A. Costing of seedling Business

C. Cost/Revenue for five years

​​​​​​​D. Financial Indicator Calculation

Assumptions:

1. Seedling price is INR 2.5 per Unit

2. Entrepreneur farm will contribute his own land and partial labour

3. All other cost associated with venture will be invested directly by farmer which will give significantly higher return

14.3 Financial Indicators

Internal Rate of Return (IRR):

The project internal rate of return should be more than 15% as per the current financial scenario of the country. The project IRR is 72.5% therefore it is clearly indicating that the project is feasible for investment.

Payback Period:

The Payback period for the project is 1 year and 4 months. It should be less than 4 to 5 years therefore the project payback periods are within the limit.

Net Present Value (NPV):

With a discount rate of 15% and a span of 5 years, the projected cash inflows are worth Rs. 31,59,948. Today, this is greater than the present value of cost cash outflow of Rs. 25,27,959. The resulting positive NPV of the above project is Rs. 6,31,990 which indicates that pursuing the above project may be positive optimal.

Annexure

Informed Consent

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