COOPERATIVES

A case for reform

ATUL DEULGAONKAR

BY SPECIAL ARRANGEMENT

The ethanol distillery unit of a sugar factory in Karnataka.

THE cooperative sugar sector in Maharashtra has not woken up to the alarm signals coming from the industry in the past five years. Thirteen cooperative sugar factories in the State have been declared liquidated and 56 are sick. The accumulated losses from the sick factories are over Rs.1,900 crores. Last year 100 factories could crush cane; this season, only 70 to 80 factories could commence work. A steady decline in the cultivation of sugarcane is directly affecting the factories.

Sharad Pawar, Union Agriculture Minister and a powerful presence in the sugar factory sector in Maharashtra, noted on the occasion of the centenary of the cooperative movement that financial indiscipline, lack of transparency and non-professional management had crippled the sugar cooperatives. Although sugar factories form the lifeline of the State, they should learn to stand on their own, he said. The State's sugar industry is urgently in need of a transformation of its cooperative management and the professional approach displayed by AMUL, Gujarat's milk cooperative movement, can be a model for this.

The present problems facing the sugar industry in India in general and Maharashtra in particular are created by the industry itself and not caused by any governmental interference. Most of the players in the industry have not maintained, modernised or expanded their plants. But a few have changed with the times and have pursued an agenda for reform. They have realised that the by-products of sugarcane - such as molasses, bagasse and press mud - can yield profits too.

"Over 95 per cent of the factories are incurring losses and may continue to do so unless the industry changes its myopic outlook," says Kushagra Nayan Bajaj, chief executive officer, Bajaj Hindustan Ltd. (BHL). BHL is already India's largest producer of ethanol or alcohol, from sugarcane, with 145 lakh kilolitres a day. It crushes 31,000 tonnes of sugarcane a day in its plants at Golagokarannath, Palia Kalan and Meerut in Uttar Pradesh. BHL, also the country's largest sugar producer, now aims to triple the plants' capacity to around 100,000 tonnes a day (tcd) over the next three to four years through expansions and acquisitions.

Ethanol is an environment-friendly, clean fuel. Brazil, one of the world leaders in the production of sugar and ethanol, uses 40 per cent ethanol in petrol. The Government of India has allowed the addition of 5 per cent ethanol in petrol to save foreign exchange; India now imports nearly 70 per cent of its crude petroleum requirements.

Shree Renuka Sugars Ltd. (SRSL) in Karnataka's Belgaum district is another factory that makes the most of the opportunity for value-addition. "Gone are the days of selling only sugar. Now it could be any sugar by-product [power, biofertilizers, bagasse, alcohol, and so on], which gives more benefits," says Narendra Murkumbi, its managing director. Its revenue from the sale of power, alcohol and biofertilizers is steadily rising. Murkumbi initiated the import of raw sugar to produce refined (pure or chemical-free) sugar during the off season, when sugarcane is not available, which usually lasts four to six months a year. This strategy has helped SRSL achieve optimum utilisation of its plant.

In many countries, raw sugar is purified by adding lime to sugarcane juice. The sugar produced in Asian countries is plantation sugar, which is not refined. The purity of sugar is measured in terms of ICUMSA (International Commission for Uniform Method of Sugar Analysis). A lower ICUMSA means less impurities. Brazil and Cuba produce sugar with 50 ICUMSA whereas Indian sugar has an average ICUMSA of over 100. The price of raw sugar in the world market is Rs.7 to 8 a kilogram while refined sugar fetches Rs.20 to 24 a kg. In India, plantation sugar costs Rs.10 to 13 a kg.

India will have to produce more refined sugar as the demand for plantation sugar in the world market is minimal. Sugar experts predict that the market for refined sugar will grow exponentially. In that case, the cooperative sugar factories will have to produce raw sugar to supply the few refined sugar producers in the country.

"We are not quality-conscious, so our asset of human resources becomes a liability. It is high time there was a conceptual change. Let this message go from top to bottom of the factory managements. Then we can prove that we too can produce chemical-free, pure and refined sugar and establish ourselves in the world market," says S.D. Bokhare, managing director of Vikas cooperative sugar factory near Latur, which has bagged several national awards for efficiency.

The State governments of Karnataka, Andhra Pradesh and Tamil Nadu purchase power from sugar factories in their respective territories. This prompted the Maharashtra government to encourage its sugar factories to take up power generation on a big scale. Many sugar factories, including Natural Sugar and Allied Industries (NSAI) at Ranjani in Osmanabad district, procured turbines to produce power from bagasse. But since the State government and the factories could not make power purchase agreements for the past nine years, the investment in turbines seemed a wasteful expenditure. It was in such a situation that B.B. Thombre, chairman and managing director of NSAI, decided to go in for the production of ferro alloys, used as raw material in the manufacture of various types and grades of steel. With a capacity of 40 tonnes a day, NSAI produces ferro manganese, ferro silicon, silico manganese and ferro chromium from its existing furnace. Ferro-alloys earn the sugar factory a revenue of Rs.45 million a year.

When the rates of bagasse went up following the crisis in cane production, Thombre decided to use agro-waste as fuel in the boiler. NSAI purchased agro-waste at the rate of Rs.300 a tonne from the fields. In 90 days, NSAI procured 7,000 tonnes of agro-waste worth Rs.50 lakhs, which benefited 2,000 farmers.

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