With bulging stocks and unremunerative prices, the industry suffers from heavy debt with consequent interest burden and defaults to cane growers.
Sadly the industry and policymakers refuse to look at several viable options to ensure the regular health and viability of the industry. Admittedly, with the industry’s fortunes closely linked with large numbers of cane growers with political clout, it suffers from lack of reforms.
Some four decades ago the brilliant business leader S Viswanathan (SV) of Seshasayee Group suggested a correction. He advised to treat sugar as a by-product and give priority to several other products that are produced from sugarcane. Look at these: sugar, molasses and bagasse can be considered the major products of sugarcane. Sugar accounts for just around 8-12 per cent of the sugarcane. Why then the over-importance for this minor element of sucrose content?
Use bagasse for newsprint production
In the 1980s Chief Minister M G Ramachandran set up the Tamil Nadu Newsprint & Papers Ltd. (TNPL) on the advice of SV. At that point, this project was the largest investment by the state. The project envisaged collecting bagasse from six sugar mills, providing the latter with coal-fired boilers and compensating them for the cost of steam. The logistics to collect and store the bagasse was effectively created. TNPL established the technology, for the first time on this scale globally and, in quick time, emerged the most profitable of the state’s enterprises. It has an unbroken record of growth and profit for three decades. In 2014-15, TNPL’s production was 400,000 tonnes; net profit Rs 166.73 crore.
Consumption of newsprint is on the increase. However, production capacity within the country has been modest. Precious foreign exchange continues to be spent on importing newsprint. It will make for enormous economic sense to persuade large sugar producing states like Maharashtra, UP and Karnataka to save bagasse, presently burnt as fuel, for the production of newsprint.
IE has been suggesting setting up a pulp plant in Mizoram, which produces bamboo in abundance. Such pulp can be moved through the Port of Sitwe in Myanmar and could be brought to India by ship. This can also help create much needed employment in Mizoram.
Focus on production of ethanol...
Molasses, another major component in the process of sugar production, is the base for a number of acetate chemicals and ethanol. Brazil, the largest producer of sugar, has been producing ethanol in large quantities which go as fuel for automobiles. In recent years, in its drive for self sufficiency in fuel requirements, the United States has been using more than half of its production of corn for producing ethanol. In several states of the US it is mandatory to blend ethanol with gasoline.
Sadly, India, has not been focusing on this. Surprisingly, the country meets over 80 per cent of its fuel requirements through the import of crude and spends a large quantum of precious foreign exchange. Though the target was set to blend five per cent of ethanol with gasoline, it has made little progress. A recent initiative to incentivise the use of ethanol for auto fuel by offering a higher price and removal of several restrictions should help. But we need to have the determination of the US to enforce rigorously a much desired and needed change. There is a case for cutting down production of sugar which is in surplus and switch to production of ethanol by the tax policy.
Dharangadhara Chemical Works set up a separate unit, Plastics, Resins and Chemicals Limited, to produce PVC from the agro route. Chemplast later followed this. Sadly, there was a lack of volume and the needed government support to build on these.
Sugar mills in the meantime, found a lot of profit in creating potable alcohol. The huge jump in alcohol consumption in recent years has been a big incentive for sugar mills. There is enormous scope for tweaking the tax policy that would encourage more of ethanol going for industrial uses.