Sugar Industry In Andhra Pradesh Is In For Bitter Times

Hyderabad: The sugar industry in Andhra Pradesh is in for bitter times. Drop in acreage, rapid decline in volumes of cane crushed by mills, and rising labour costs for harvesting, portend trouble in the coming season.

Painting a rather dismal picture, the South India Sugar Mills Association (SISMA) said even sugarcane farmers were shifting to paddy and corn cultivation, as support price was not attractive.

The State would see a drastic drop of nearly 60 lakh tonnes of cane crushed in the coming season (November-April), as the total acreage is set to decline from the present 1.75 lakh hectares to 1.08 lakh hectares, said N Nageswara Rao, President of SISMA.

In terms of crushed cane, while the figure was 1.75 crore tonnes in 2006-07, it fell to 1.3 crore tonnes in 2007-08. The coming season is expected see a bigger fall, Rao told newspersons, on the sidelines of a meeting of SISMA here on Thursday.

Rao, who is also the Managing Director of NCS Sugars, said, “The sugar industry in the State will be in doldrums next year with all these negative developments. Therefore, the Association has decided to approach the Chief Minister with a set of demands.”

These demands include free seed to farmers, provision of mechanised harvests in view of high labour costs (up from Rs 125 to Rs 400 per labour) and imposition of entry tax, since sugar was freely coming in from Maharashtra, Rao said.

Andhra Pradesh has a total of 37 sugar mills (25 in cooperative and 12 in the private sector), and they have lost nearly Rs 300 crore because of the adverse factors. The mills are not able to pay higher prices to the farmers. In Andhra Pradesh, the price ranges between Rs 1,050 to Rs 1,150 per tonne of cane crushed, he said.

Sugar Companies Reeling Under Margin Pressure

New Delhi: The bagasse-based cogeneration option, which started as a cost-saving measure by sugar companies when the industry was reeling under margin pressure a few years ago, is fast turning into a money-spinning option.

Co-generation is the concept of producing two forms of energy from one fuel, of which one is heat and the other may be electricity or mechanical energy.

Sugar producers across the country, who are fast shifting to bagasse-based generation option to meet captive power needs, are increasingly exporting surplus to the grid from their plants and claiming CDM (Clean Development Mechanism) benefits in return.

Among manufacturers exploiting the cogeneration option, DCM Shriram Consolidated Ltd (DSCL) is ramping up its bagasse-based generation and exporting surplus power to the tune of 27.5 MW to the Uttar Pradesh Power Corporation Ltd (UPPCL) and getting CDM benefits in return.

Sri Chamundeswari Sugars is building a 26-MW cogeneration plant at its factory in Karnataka, of which 18 MW will be an exportable surplus to the State-owned utilities.

The Deoband Bagasse Cogeneration Power project is exporting surplus electricity to the tune of around 20 MW to UPPCL.

Eyeing contracts

Global power equipment major ABB is among the majors eyeing contracts for supplying the automation systems and electrical balance-of-plant to upcoming cogeneration units.

In case of bagasse-based cogeneration plants, power comes from burning bagasse, the fibrous residue remaining when sugarcane is crushed to make sugar.

“The cogeneration system needs to be encouraged in the overall interest of energy efficiency and also grid stability. A significant potential for cogeneration exists in the country, particularly in the sugar industry,” a Central Electricity Regulatory Commission (CERC) official said.

With conservative estimates suggesting a potential of over 20,000 MW power from co-generation in India, the CERC has now directed state regulators to promote arrangements between co-generator unit owners and distribution utilities for purchase of surplus power from such plants.

With spiralling prices of fossil fuels translating into higher captive power generation costs, manufacturers with sugar or rice mills, distilleries, petrochemical plants, besides fertiliser, steel, cement, paper and aluminium units, are increasingly shifting to the cheaper co-generation option.

Price variation

DCSL, which has a bagasse-based cogeneration capacity of 70.5 MW currently, is adding another 24 MW during the current fiscal.

The viability of bagasse-based generation, Ajay Shriram, Chairman and Senior Managing Director of DSCL, said, “depends upon the prevailing sale price of bagasse in the market. Unlike coal and oil, the price of bagasse varies widely from season to season. However, against oil, the price is likely to remain competitive always but against coal it may not. With CDM benefit, the viability improves… DSCL has gone into cogeneration for export in a big way due to the existence of CDM benefit.”

DSCL received its full claim of Rs 1.34 crore during the last financial year.

India is expected to add 1,200 MW bagasse-based power capacity during the ongoing Eleventh Plan period.

This would be nearly twice the 750 MW added during the Tenth Plan. India, which is among the largest sugar producer in the world, generates nearly 40 million metric tonne (MMT) of bagasse, most of which is now finding use as a captive boiler fuel.

Not A Good Year For Sugar Industry

While the second half of the calendar year has not been good enough for the sugar industry on account of export ban and declining prices, the sugar industry may not see a better time next year as well. The prices will remain under pressure owing to bumper production (230 lakh tonne). The only hope is co-generation and ethanol. In 2006, the acreage of sugarcane in the country increased to 44.4 lakh hectare from 42.8 lakh hectare in 2005. More farmers turned to cane cultivation as a result of incentives, besides, a good cane price. The government is keen on taking the ethanol blending to 10 per cent by June 2007. If it is achieved, sugar mills will have an assured income. However, things are not very bright here. The 5 per cent blending is yet to take off nationally and has missed three deadlines. The profits and revenues of sugar companies over the next 3-4 quarters are expected to suffer. Balrampur Chini Mills and Dhampur Sugars recently announced declines in quarterly profits. Payments to farmers by the mills can also be delayed in the current season as a result of the softening sugar prices.