The Sugar Sector gets a push

Maharashtra, the bastion of cooperative sugar mills, is set to see a slew of big investments from the private sector in the run-up to the total decontrol of the industry proposed by the government from the coming crushing season.The state’s cooperative sugar mills have been viewed by the industry as the roadblock to total decontrol and optimum profit and capacity realisation. The country’s biggest sugar producing state is nursing around 80 new proposals from the private sector to set up sugar mills. That’s over 75% of the 100 new mills due to come up country-wide in the next two years.The new proposals are currently with the state’s Sugar Commissionerate and 11 have already been granted aerial clearance (of 15 km radius). Maharashtra alone could be looking at galvanising investment of over Rs 12,000 crore over the next two years. That would be almost equal to the turnover of the 182-mill strong (of the 550 mills countrywide) cooperative sugar industry.Currently, an estimated 95% of sugar produced in Maharashtra is from the cooperative sector, which also accounts for 30% of the national sugar output. A marginal 5% of sugar output in the state is attributed to private mills. Each year, sugar cooperatives have contributed Rs 1,800 crore to the state exchequer and another Rs 450 crore to the central exchequer.
The new interest by the private sector in Maharashtra’s sugar sector despite the sorry saga of failing cooperatives comes in the wake of estimates that India’s sugar consumption is growing at 10% annually.But that is clearly not the sole only motive. With 10% ethanol blending with petrol due from October, oil companies such as IOC and HPCL, even RIL and others chalked up plans to acquire sugar mills in Bihar, Andhra Pradesh etc. Oil companies have also bought land in Brazil for growing sugarcane.Over the last several months, companies with diverse core business have taken up opportunities in the sugar sector here. Traditional sugar players have also woken up to the new opportunities.
There have been no new investments in the sector for some time now. But new investments in Maharashtra and Bihar together would be around Rs 20, 000 crore. This sector needs reform urgently including contract farming, said industry sources. Maintains VK Bansal of Sugarasia 2008: ”New cane mechanisation can add as much as 3 million tonnes of sugar to the country’s kitty by cutting cane close to the ground and reducing lead time.”Meanwhile, private sector sugar sector equipment majors are looking at a significant leapfrogging of business,in tandem with the new energy in the sector.