A

PROJECT REPORT

ON

“Commodity Specific Study on Sugar”

In
(Triveni Engineering Ltd)

SUBMITTED IN THE PARTIAL FULFILMENT OF

“Master of Business Administration”
(TWO YEAR FULL TIME PROGRAMME)

SUBMITED TO: - SUBMITTED BY: -

Priya Agrwal Deepak Kumar
Roll No-1169570025
M.B.A (SEM. IVth)

Batch – 2011-2013
SHRI RAM GROUP OF COLLEGES

1
 MUZAFFARNAGAR, UTTAR PRADESH
ACKNOWLEDGMENT

We express our deepest gratitude to our Executive Principal Dr. Mr. B K

Tyagi, for his invaluable guidance and blessings.

We are very grateful to our supervisor miss Priya Agrwal

for providing us with an environment to complete

our project successfully.

We express our sincere thanks to all of our teachers for there constant

encouragement and support throughout our course, especially for the useful

suggestions given during the course of the project period.

We also thank all the staff members of our college and technicians for their

help in making this project a successful one.

Finally, we take this opportunity to extend our deep appreciation to our family

and friends, for all that they meant to us during the crucial times of the

completion of our project.

Deepak Kumar
…………...

2
 PREFACE
The conceptual knowledge acquired by management students is best manifested in the

Projects and training they undergo. As the part of their curriculum of BBA.I have got a

Change to undergo practical training in “Triveni Engineering Ltd”Deoband

The Present project gave a perfect vent to my understanding of the management specially the

Concept of “Commodity Specific Study on Sugar”

The project report entitled “Commodity Specific Study on Sugar” in Triveni Engineering Ltd”

Deoband .

This report will provide the information regarding the inventory Management process in “Triveni

Engineering Ltd” Deoband

. I also hope that this report will be beneficial

For my next batches and for those who are related to this topic.

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 CONTENTS

PART – I

1. Information about organization. 5

2. Brief history of organization 29

3. Structure, performance products/ services and problem faced. 31

PART - II

1. Introduction of topic. 43

2. Methodology. 44

3. Objective 50

4. Data Analysis & Interpretation. 53

5. Conclusions 71

6. Limitations. 72

7. Recommendation. 73

8. Findings 74

9. Bibliography & Reference 75

4
 Introduction about organization

The Triveni Engineering Ltd is a focused, innovative corporation having core competencies in the

areas of sugar and Engineering. Our growth has been empowered with steadfast and distinctive

adherence to business ethics, transparent governance and commitment to highest standards of

social responsibility. From a humble beginning in 1930s, we have transformed ourselves into an

INR 19 billion company through an interesting blend of people, technology and entrepreneurial

spirit. Today, we touch the lives of millions of people globally by serving our customers in the

areas of sugar, turbines, gears & gearboxes and water & wastewater treatment. While we are

amongst the three largest sugar manufacturers in India, we are also the market leaders in our

engineering businesses, having a global footprint. Embracing the virtues of integrity, excellence

and commitment, we move ahead to take on the opportunities and challenges offered by the future.

We are geared to transform into a truly global enterprise through a prudent mix of technical

innovation and exceptional customer service delivery. Our commitment to excellence and strong

corporate governance guides us in this endeavour, as we look ahead at powerful growth and

building a socially equitable, sustainable future.

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Chairman and Managing Director Age: 65 years

Mr. Dhruv M. Sawhney, Chairman & Managing Director graduated with a

Masters in Mechanical Sciences from Emmanuel College, University of

Cambridge, U.K. and M.B.A with distinction from the Wharton School, University

of Pennsylvania, U.S.A. He was on the Dean's list for all terms, came second in

the University, and is a life member of Beta Gama Sigma. Mr. Sawhney has

received the highest civilian award "Chevalier de la Legion d'Honneur" from President Chirac of

the French Republic.

Mr. Sawhney is a Past President of the Confederation of Indian Industry (CII), the Indian Sugar

Mills Association and the Sugar Technologists Association of India. He was the first Chairman

from the developing world of the International Society of Sugar Cane Technologists. Mr. Sawhney

has served on the Board of various public sector organizations and chaired Government advisory

councils on Industry, Energy and Sugar. He chairs the Commonwealth Leadership Development

Conferences founded by HRH Prince Philip, The Duke of Edinburgh in 1956 to foster and broaden

the understanding and decision-making ability of individuals in the commonwealth countries. Mr

Sawhney is Deputy Chairman of the Evian Group and Chairman of the India Steering Committee

of the World Economic Forum, Switzerland. He also chairs CII's International and Internal Audit
Committees.

Mr. Sawhney takes a keen interest in education, and was a past Governor of the Indian Institute of

Management, Lucknow, the Management Institute at the University of Delhi and Chairman of the

Doon School, Dehra Dun, one of India's most famous Public Schools. He is a Companion Member

6
of the Chartered Institute of Management, U.K. and chairs the Board of Trustees of Delhi's oldest

private charitable hospital. He was President of the All India Chess Federation for 12 years.

The company believes that sound corporate Governance is critical to enhance and retain

stakeholder's trust. Accordingly the comapany has consistently practiced good coporate

governance. The company creates an envIroment for the efficient, just and ethical conduct of the

business to enable the Management to meet ists obligations in a fair, transparent and equitable

manner to all stakeholder viz. its shareholders, farmers, customers, employees and the community

in which the company operates. The Board of Directors believe in managing the company's affairs

efficiently and in a responsible manner. The company envisages the attainment of a high level of

transparency and accountabillity in the functioning of the company and the conduct of its business

internally and externally.

We comply with the SEBI Guidelines in respect of corporate governance, especially with respect to

broad basing of the board, constituting the committees such as the Audit Committee and the

Shareholders'/Investors' Grievance Committee.

We are also in compliance with the requirements of SEBI circular bearing number

SEBI/CFD/DIL/CG/1/2004 dated October 29, 2004, which notifies revised corporate governance

guidelines, by the required date (currently notified as December 31, 2005) for listed entities.

Triveni has carved out the following committees of our Board of Directors for institutionalizing

compliance with corporate governance requirements:

 Audit Committee
 Investors’ Grievance and Share Transfer Committee
 Remuneration Committee
 Code of Conduct for Directors and Senior Management

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 Audit committee

The members of the Audit Committee of the board are:

 Lt. Gen. K.K. Hazari (Retd.) - Chairman
 Mr. R.C. Sharma
 Mr. V. Venkateswarlu (Ceased to be a Director w.e.f. April 25, 2009)
 Mr. Amal Ganguli (Inducted w.e.f. January 19, 2009)

The Audit Committee oversees the company's financial reporting process and disclosure of its

financial information. It further reviews the accounting and financial policies and practices, internal

control systems, quarterly and half yearly and annual financial results. It also recommends

appointment of statutory and internal auditors and considers and discusses reports and observations

made by them.

Shareholder / investor’s grievance committee

With effect from 14th November, 2007 the Share Transfer/Transmission Committee was merged

with the Investor's Grievances Committee and its nomenclature was changed as “Investors'

Grievance and Share Transfer Committee”.

The Committee consists of two Non-Executive Independent Directors:

 Lt. Gen. K.K. Hazari (Retd.) - Chairman
 Mr. R.C. Sharma

*Effective January 20, 2009, Mrs Geeta Bhalla, Company Secretary has been designated as the compliance

officer.

The Committee is authorised to look into and review the redressal of shareholders and investors

grievances such as non-receipt of transferred/transmitted share certificates/annual report/refund

orders/dividend warrants etc. as also to review the reports submitted by Mrs Geeta Bhalla,

8
Company Secretary relating to approval / confirmation of requests for share transfer / transmission/

transposition/consolidation / issue of duplicate share certificates/sub-division, remat, demat of

shares etc from time to time.

Remuneration committee
The members of the Remuneration Committee of the board are:
 Dr. F.C. Kohli - Chairman
 Lt. Gen. K.K. Hazari (Retd.)
 Mr. R.C. Sharma

The Remuneration Committee determines the company's remuneration policy, having regard to

performance standards and existing industry practice. Under the existing policies of our company,

the remuneration committee determines the remuneration payable to the relatives of the promoters

who hold positions in our company.

Philosophy
Triveni's commitment to ethical and lawful business conduct is a fundamental shared value of the

Board of Directors, the senior management and all employees of the Company. Consistent with its

Values and Beliefs, Triveni has formulated the following Code of Conduct as a guide. The Code

does not attempt to be comprehensive or cover all possible situations. It encourages the Triveni

team to take positive actions, which are not only commensurate with the Values and Beliefs, but

are also perceived to be so. Triveni expects all its employees to implement the Code in its true

spirit.

Applicability

9
The Code of Conduct shall come into force with immediate effect and it shall apply to -

1. all Directors of the Company, whether executive or non-executive including Nominee

Directors.

2. all Executives of the Company of the rank of General Manager and above including all
functional heads.

Quality of products and services

The Company shall be committed to supply goods and services of the highest quality standards

backed by efficient after-sales service consistent with the requirements of the customers to ensure

their total satisfaction. The quality standards of the company's goods and services should at least

meet the required national standards and the company should endeavour to achieve international

standards.

Protecting company assets

The assets of the Company should not be misused but employed for the purpose of conducting the

business for which they are duly authorized. These include tangible assets such as equipment and

machinery, systems, facilities, materials, resources as well as intangible assets such as proprietary

information, relationships with customers and suppliers, etc.

Financial records

The Company shall prepare and maintain its accounts fairly and accurately in accordance with the

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accounting and financial reporting standards which represent the generally accepted guidelines,

principles, standards, laws and regulations.

Internal accounting and audit procedures shall fairly and accurately reflect all of the company's

business transactions and disposition of assets. All required information shall be accessible to

company auditors and government agencies.

Equal Opportunities Employer

The Company shall provide equal opportunities to all its employees and all applicants for

employment, without regard to their race, caste, religion, marital status, sex, nationality, disability

and veteran status. Employees of the company shall be treated with dignity and in accordance with

the Company's policy to maintain a work environment free of sexual harassment, whether physical,

verbal or psychological. Employee policies and practices shall be administered in a manner that

would ensure that in all matters, equal opportunity is provided to those eligible and that decisions

are merit-based.

Gifts and donations

The Company, its Directors and Executives shall neither receive nor offer or make, directly or

indirectly, any illegal payments, remuneration, gifts, donations or comparable benefits that are

intended to, or perceived to obtain business or uncompetitive favours for the conduct of its

business. However, the Company and its Directors and Executives may accept and offer nominal

gifts which are customarily given and are of commemorative nature for special events.

Ethical conduct

The Directors and Executives shall deal on behalf of the company with professionalism, honesty,

11
integrity as well as high moral and ethical standards. Such conduct shall be fair and transparent and

be perceived to be such by third parties. Every Director and Executive of the Company shall, in his
business conduct, comply with all applicable laws and regulations, both in letter and in spirit.

Concurrent employment

The Executives of the Company shall not, without the prior approval of the managing director of

the company, accept employment or a position of responsibility (such as a consultant or a director)

with a competitor company, nor provide "freelance" services to anyone. In the case of a Director or

the Managing Director, such prior approval must be obtained from the Board of Directors of the

company.

Confidentiality

The Directors and Executives shall maintain the confidentiality of confidential information of the

Company or that of any customer, supplier or business associate of the Company to which

Company has a duty to maintain confidentiality, except when disclosure is authorized or legally

mandated. The use of confidential information for his/her own advantage or profit is also

prohibited.

Shareholders

The Company shall be committed to enhance shareholder value and comply with all regulations

and laws that govern shareholders' rights. The board of directors of the Company shall duly and

fairly inform its shareholders about all relevant aspects of the company's business and disclose such

information in accordance with the respective regulations and agreements.

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Third-party representation

Parties that have business dealings with the Company such as consultants, agents, sales

representatives, producers, contractors, suppliers, etc. shall not be authorised to represent this

company if their business conduct and ethics are known to be inconsistent with this Code of

Conduct.

Conflicts of Interest

The Directors and Executives should be scrupulous in avoiding 'conflicts of interest' with the

Company. In case there is likely to be a conflict of interest, he/she should make full disclosure of

all facts and circumstances thereof to the Chairman & Managing Director of the Company and a

prior written approval be obtained. A conflict situation can arise in the under-mentioned

circumstances :-

a. when a Director or Executive takes action or has interests that may make it difficult to
perform his or her work objectively and effectively;

b. the receipt of improper personal benefits by a member of his or her family as a result of
one's position in the Company;
c. any outside business activity that detracts an individual's ability to devote appropriate time
and attention to his or her responsibilities with the Company;
d. any significant ownership interest in any supplier, customer or competitor of the Company;
e. any consulting or employment relationship with any supplier, customer, business associate
or competitor of the Company.

Interpretation of the Code

Any question or interpretation under this Code of Conduct will be handled by the Executive Sub-

Committee of the Board of Directors of the Company. The Executive Sub-Committee has the

13
authority to waive compliance with this Code of Conduct for any Director or Executive of the

Company. The person seeking waiver of this Code shall make full disclosure of the particular

circumstances to the Executive Sub-Committee.

(I)(a) Statement Showing Shareholding Pattern

Name of the Company: Triveni Engineering & Industries Limited

Scrip Code: TRIVENI (NSE) / 532356 (BSE)

Class of Security: Equity Shares of Re. 1/- each.

Quarter ended: 30th September 2009

Cate- Category of Number of Total Number of Total Shares
gory shareholder shareholders number of shares held in shareholding as Pledged or
code shares dematerialized a percentage of otherwise
form total number of encumbered
shares
As a As a
As a % Number
% age %
age of of
of age
(A+B+C) Shares
(A+B)
(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX)
=
(VIII)
/ (IV)
* 100
(A) Promoter and Promoter Group
(1) Indian

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 Individuals/
Hindu
(a) 6* 89362111 65063701 34.653 34.653 Nil Nil
Undivided
Family
Central
Government/
(b) - - - - - - -
State
Government(s)
Bodies
(c) 9** 85960422 62460422 33.333 33.333 Nil Nil
Corporate
Financial
(d) Institutions/ - - - - - - -
Banks
Any Other
(e) - - - - - - -
(specify)
Sub-Total (A)
15 175322533 127524123 67.986 67.986 Nil Nil
(1)
2. Foreign
(a) Individuals
(Non-Resident
Individuals/ - - - - - - -
Foreign
Individuals)
Bodies
(b) - - - - - - -
Corporate
(c) Institutions - - - - - - -
Any Other
(d) - - - - - - -
(specify)
Sub-Total (A)
- - - - - - -
(2)
Total
Shareholding
of Promoter
15 175322533 127524123 67.986 67.986 Nil Nil
and Promoter
Group (A)=
(A)(1)+(A)(2)

*There are 5 individuals and one HUF promoter shareholders holding 24298410 equity shares in

15
physical form out of which three promoters have 2 demat accounts each, which has been shown as

single record. Thus, number of shareholders under 1(a) has been shown as 6.

** There are 9 Bodies corporate under this category, out of which 5 are holding 23500000 equity

shares in physical form and two bodies corporate have two demat accounts which have been shown
as single record. Thus, number of shareholders under 1(c) has been shown as 9.

Cate- Category of Number of Total Number of Total Shares

gory shareholder shareholders number of shares held in shareholding as Pledged or
code shares dematerialized a percentage of otherwise
form total number of encumbered
shares
As a % As a % Number As a
age of age of of %
(A+B) (A+B+C) Shares age
(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) =
(VIII)
/ (IV)
* 100
(B) Public shareholding N.A N.A
1. Institutions N.A N.A
Mutual
(a) 16 24207767 24207767 9.387 9.387 - -
Funds/UTI
Financial
(b) Institutions/ - - - - - - -
Banks
Central
Government/
(c) - - - - - - -
State
Government(s)
Venture
(d) - - - - - - -
Capital Funds
Insurance
(e) 1 1779143 1779143 0.690 0.690 - -
Companies
Foreign
(f) Institutional 23 40565286 40565286 15.730 15.730 - -
Investors
(g) Foreign - - - - - - -

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 Venture
Capital
Investors
Any Other
(h) - - - - - - -
(specify)
Sub-Total (B)
40 66552196 66552196 25.807 25.807 - -
(1)
2. Non-institutions N.A N.A
(a) Bodies
907 2736012 2736011 1.061 1.061 - -
Corporate
Individuals -
i. Individual
shareholders
holding
35726 10031765 9580886 3.890 3.890 - -
nominal share
capital up to
Rs. 1 lakh.*
(b)
ii. Individual
shareholders
holding
nominal share 9 2057841 2057841 0.798 0.798 - -
capital in
excess of Rs. 1
lakh.**
Any Other (specify)
[i] NRI 375 713558 713558 0.277 0.277 - -
[ii] HUF 636 281713 281713 0.109 0.109 - -
(c) [iii] Clearing
208 176932 176932 0.069 0.069 - -
Member
[iv] Trust 1 7000 7000 0.003 0.003 -
[v] OCB 1 600 600 0.000 0.000 -
Sub-Total (B)
37863 16005421 15554541 6.207 6.207 - -
(2)
Total Public
Shareholding
37903 82557617 82106737 32.014 32.014 N.A N.A
(B)= (B)(1)+
(B)(2)
TOTAL (A)+
37918 257880150 209630860 100.000 100.000 - -
(B)

17
 Shares held by
Custodians and
against which
(C) - - - N.A - N.A N.A
Depository
Receipts have
been issued
GRAND
TOTAL (A)+ 37918 257880150 209630860 100.000 100.000 - -
(B)+(C)

N.A. – Not applicable

*includes 11800 equity shares of Re. 1/- each held by two Directors and a Director's relative.

**includes 1168350 equity shares of Re. 1/- each held by a Director and his relatives.

(I)(b) Statement showing Shareholding of persons belonging to the

category “Promoter

and Promoter Group”

Sr. Name of the Total Shares held Shares pledged or otherwise

No. shareholder encumbered
Number As a % of Number As a As a % of
grand total percentage grand total (A)
(A) + (B) + + (B) + (C) of
(C) sub-clause (I)
(a)
(I) (II) (III) (IV) (V) (VI) = (V) / (VII)
(III)* 100
A. Individual/Hindu Undivided Family
1. Dhruv M Sawhney 36124645 14.008 Nil Nil Nil
2. Rati Sawhney 20194909 7.831 Nil Nil Nil
3. Tarun Sawhney 14266775 5.532 Nil Nil Nil
4. Nikhil Sawhney 15071557 5.844 Nil Nil Nil

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 Manmohan
5. 3679225 1.427 Nil Nil Nil
Sawhney (HUF)
6. Tarana Sawhney 25000 0.010 Nil Nil Nil
Total (A) 89362111 34.653 Nil Nil Nil
B. Bodies Corporate
Umananda Trade &
1. 20157589 7.817 Nil Nil Nil
Finance Limited
Tarnik Investments
2. 18680527 7.244 Nil Nil Nil
& Trading Limited.
Subhadra Trade &
3. 16307375 6.324 Nil Nil Nil
Finance Limited
Kameni Upaskar
4. 10328525 4.005 Nil Nil Nil
Limited
Dhankari
5. 14049045 5.448 Nil Nil Nil
Investments Limited
TOFSL Trading &
6. Investments 4202354 1.630 Nil Nil Nil
Limited.
The Engineering &
7. Technical Services 1163757 0.451 Nil Nil Nil
Limited
8. Carvanserai Limited 422750 0.164 Nil Nil Nil
Accurate Traders
9. 648500 0.251 Nil Nil Nil
Limited
Total (B) 85960422 33.333 Nil Nil Nil
TOTAL(A+B) 175322533 67.986 Nil Nil Nil

(I)(c) Statement showing Shareholding of persons belonging to the

category “Public” and

holding more than 1% of the total number of shares

19
 Sr. Name of the shareholder Number Shares as a percentage of
No. of shares total number of shares {i.e.,
Grand Total (A)+(B)+(C)
indicated in Statement at
para (I)(a) above}
A. Mutual Funds
RELIANCE CAPITAL TRUSTEE CO.
1. LTD. - A/C RELIANCE TAX SAVER 4000000 1.551
(ELSS) FUND
RELIANCE CAPITAL TRUSTEE CO
2. LTD-RELIANCE NATURAL 9022431 3.499
RESOURCES FUND
SUNDARAM BNP PARIBAS
MUTUAL FUND A/C
3. 2849463 1.105
SUNDARAMBNP PARIBAS SELECT
MIDCAP
Total (A) 15871894 6.155
B. Foreign Institutional Investors
1. NALANDA INDIA FUND LIMITED 25788000 10.000
HSBC GLOBAL INVESTMENT
FUNDS A/C HSBC
2. 9214878 3.573
GLOBALINVESTMENT FUNDS
MAURITIUS LIMITED
NORGES BANK A/C
3. GOVERNMENT PETROLEUM 2929008 1.136
FUND
Total (B) 37931886 14.709
TOTAL(A+B) 53803780 20.864

(I)(d) Statement showing details of locked-in shares

Sr. Name of the Category of Number of Locked-in shares as a

No. shareholder Shareholders locked-in percentage of total number of
(Promoters / shares shares {i.e., Grand Total (A)+

20
 Public ) (B)+(C) indicated in Statement
at para (I)(a) above}
1. - - - -
Total Nil Nil Nil

(II)(a) Statement showing details of Depository Receipts (DRs)

Sr. Type of outstanding DR Number of Number of Shares underlying

No. (ADRs,GDRs,SDRs,etc.) outstanding shares outstanding DRs as a
DRs underlying percentage of total
outstanding number of shares {i.e.,
DRs Grand Total (A)+(B)+
(C) indicated in
Statement at para (I)
(a) above}
1. - - - -
TOTAL Nil Nil Nil

(II)(b) Statement showing Holding of Depository Receipts (DRs), where underlying

shares are in excess of 1% of the total number of shares

Management Team

Mr. Tarun Sawhney, Executive Director,, is a promoter of the

company. He

has a Masters degree in Arts from the Emmanuel College, University of

21
Cambridge, UK and a Masters degree in Business Administration from the

Wharton School of Business, University of Pennsylvania, US.

Mr. Sawhney has work experience in the fields of e-business,

telecommunications, information technology, and financial and portfolio analysis. He worked with

AT Kearney Inc., UK, a management consultancy firm from 1998 to 2000.

He has been associated with our company since February 1, 1996 and has been appointed as

Executive Director of the Company w.e.f. 19.11.2008. Prior to his appointment as Executive

Director he was holding the position of Corporate Vice President of the Company.

Mr. Nikhil Sawhney, Executive Director, is a promoter of our

company. He

has a Bachelors degree in Arts and a Masters degree in Arts from the Emmanuel

College, University of Cambridge, UK and a Masters degree in Business

Administration from the Wharton School of Business, University of Pennsylvania,

USA.

Mr. Sawhney has worked in India and overseas in the fields of finance, consumer goods,

engineering products and capital markets. He worked with Flexibox Ltd., Manchester, UK in 1996

as a Marketing Analyst, with Nomura International, London, UK in 1997 as a Capital Markets and

Sales Analyst, with ING Barings, London, UK in 1998 as a Corporate Finance Analyst, and with

Nestle USA, Los Angeles, USA in 2003 as a Marketing Associate.

He has been associated with our company since October 1, 1999 and has been appointed as

Executive Director of the Company w.e.f. 19.11.2008. Prior to his appointment as Executive

Director he was holding the position of Corporate Vice President of the Company.

22
Mr. A.K. Tanwar, President (Sugar), has a Bachelors degree in
Electrical

Engineering and an Associate of National Sugar Institute (Sugar Engineering)

from the NSI, Kanpur.

He joined as Vice President (Sugar) as Unit Head at Deoband in 1996 and

subsequently given charge of additional Units. In the year 2005 he was elevated

to the position of President (Sugar) and given charge of all the Sugar Units of the Company. Prior

to joining Triveni, he had worked with Kashipur Sugar Unit and various Co-operative Sugar

factories in U.P.

Mr. Arun Mote, Chief Executive Officer (Turbine Business

Group), has a

Masters degree in Technology from the IIT-Bombay and a Masters degree in

Business Administration from the Jamnalal Bajaj Institute of Management

Studies, Bombay University.

He joined the Company in 1999 and prior to that he was President with Magneti

Marelli. He has earlier worked with Larsen & Toubro, SKF Bearings, Blue Star
and HPL Gmmco

(a Caterpillar Associate).

Mr. Suresh Taneja, Vice President and Chief Financial

Officer, has a

Bachelors degree in Science from Delhi University and is a Fellow of Chartered

23
Accountants from the Institute of Chartered Accountants.

He joined the Company in 1994 and has earlier worked with Oman National

Transport Company, Muscat and Eicher Tractors.

Mr. Sameer Sinha, Vice President (Power, Alcohol &

Corporate Planning),

has a Bachelors degree in Technology from the Indian Institute of Technology,

Kanpur and a Post Graduate Diploma in Management from the Indian Institute of

Management, Ahmedabad.

He joined the Company in 1994 and Prior to that he has worked with Vam

Organics, Shaw Wallace and Larsen & Toubro.

Mr. Bharat Mehta, Vice President & Chief Human Resources Officer, has

Masters Degree in Sociology, PG. Dip. in Personnel Management and P.G. Dip. in

labour Laws. He started his career as Lecturer in Udaipur University and has

subsequently worked with J.K. Industries and DCM Shriram Group prior to

joining Triveni in 1997.

24
Mr. Rajiv Rajpal, Vice President, Gear Business Group is B.E.
(Mech.). He

joined the Company in 1991 and prior to that has worked with Thermax, HCL and

Vijayshree Equipments. Currently he occupies the position of Vice President

(GBG)

Mr. B. K. Agrawal, Vice President (Water Business Group), is B.E.

(Chemical) from University of Roorkee (now Indian Institute of Technology,

Roorkee). He joined Triveni as Engineer in 1979 and has worked in various

positions. Currently he occupies the position of Vice President (WBG).

Mr. M. A. Qureshi, Chief General Manager, Sugar Unit,

Ramkola is B.E.

(Mech.). He joined the Company in 2002 and prior to that has worked for over 32

Years with private, co-operative and U.P. Sugar corporation mills.

Mr. Kuldip Singh, Chief General Manager, Sugar Unit,

Sabitgarh is B.Sc.

(Hons.) in Agriculture. He joined the Company in 2005 and prior to that has

worked for over 23 years with Simbhaoli, Bajaj Hindusthan and DCM Shriram

Group sugar factories.

25
Mr. D.N. Mishra, Chief General Manager, Sugar Unit,
Khatauli, is M.E.

(Production) & ANSI (Sugar Engg.). He joined Triveni in 2006 and prior to that

has worked for 28 years with U.P. State Sugar Corporation Ltd.

Mr. Amod Sharma, General Manager, Sugar Unit,

Chandanpur, is B.Sc.,

ANSI (Sugar Technology). He joined Sugar Unit Deoband as Head of Production

Department in 1999 and was elevated as Unit Head of Sugar Unit Chandanpur in

2006. Prior to joining Triveni he has worked for 15 years with Mansurpur,

Kashipur, Pilibhit & Shamli sugar factories.

Mr. Siva Ram Vinjamuri, General Manager, Sugar Unit,

Milaknarayanpur,

is B.E. (Mech.) ANSI (Sugar Engg.) and B.O.E. He joined Triveni in 2008 and

prior to that has worked with Mawana, Dhampur, EID Parry etc.

Mr. D.K. Shrivastava, General Manager, Sugar Unit, Deoband, is a

Chartered Accountant. He joined Triveni in 1996 as Head of Finance & Accounts

at Sugar Unit Ramkola and subsequently transferred to Sugar Unit Deoband. He

was elevated as Unit Head in 2009. Prior to joining Triveni, he has worked for 13

years with Venus Sugar, Bajaj Hindusthan and Harinagar Sugar Mills.

26
Sustained transformation & enhancement of quality delivery is an integral belief that powers our

growth and is the guiding principle for a truly exceptional customer experience. A rational blend of

determined intentions, focused efforts, intelligent direction and skillful execution offers us a strong

platform to deliver world-class products and solutions to our customers.

We have institutionalized quality in everything that we do. From processes to people to products,

focus on quality touches every constituent of our organization. To realize our goal of being a

customer-focused, truly global corporation, we have adopted quality enhancement practice by

introducing Six Sigma, Quality Management System (QMS) and Total Quality Management

(TQM) initiatives.

We lay emphasis on continuous improvement and performance excellence to ensure high standards

of quality in our products and solutions. We also focus on developing a quality management system

that is designed to facilitate continual improvement, stimulate efficiency and enhance our

customers' experience with our products and solutions.

The foundation of a robust business is the collective prosperity of its society, not just on economic

parameters but also on education, health and social environment. Triveni Engineering and

Industries Limited believes in addressing its commitments as a responsible corporate citizen to

ensure upliftment and betterment of the individuals and areas that are related to its operations

27
Farmer educational and infrastructure initiatives

Triveni Engineering contributes to the development of rural communities by making the farmers

self-reliant and financially independent through cane plantations.

The Company also took the following initiatives during the year:
 Conducted seven Kisan Goshthis, an agricultural and yield enhancement programme across
its sugar units during the year with the support of qualified agronomists.
 Convened more than 150 village meetings at each plant to educate farmers about cane
management practices.
 Arranged crop protection programmes to spread awareness and treatment for pest,
Insecticides and mechanical roughing related issues.
 Introduced innovative schemes like irrigation subsidy schemes such as boring expenses,
pump set expenses etc. during the year.

Education Initiatives
 Conducted seven Kisan Goshthis, an agricultural and yield enhancement programme across
its sugar units during the year with the support of qualified agronomists.
 Operates schools in Khatauli, Deoband and Ramkola sugar units at nominal fee.
 Triveni Engineering's Banglore and Mysore units have adopted certain schools and are
contributing to the upliftment of the educational aids and faculty expenses.

Health and sanitation initiatives

 De-silting of drains done by Khatauli and other sugar factories.
 Promoting tree plantation as an annual event across its sugar factories.
 Sugar factories at Khatauli, Deoband and Ramkola run charitable dispensary for the
villagers.
 Continued provision of financial support to Tirath Ram Shah Charitable Hospital, one of
Delhi's oldest hospitals with modern amenities for health care. This hospital provides health
services to the pocrer sections of the society in the form of free treatment, beds, medicines
etc.
 The distillery business group also contributes in the community development by providing
support to local school, building culvert, installation of hand pumps and also helped in
environmental hygiene.

28
We have a strong global presence either through our strategic tie ups or joint ventures with dealers

and representatives all over the world.

29
 History of Triveni Engineering Ltd

Face sheet

In India Trieveni Engineering Ltd is the first company to rise to superlatives in many areas of our

operations. Given below is a glimpse:

1988

Completion of the largest Wastewater Treatment Plant in India, of 182 MLD capacity constructed

on turnkey basis for Vizag Steel Plant

1989

Awarded "Certificate of Merit" for best performance during season 1987-88 by National

Productivity Council of India. This award was presented by Hon'ble Shri J. Vengala Rao, then

Hon'ble Minister of Industries, Govt. of India and President of NPC.

1994

Gear Manufacturing Unit becomes the first to be ISO-9001 Certified in India.

1999

Completion of the largest Oil Water Separation system for Reliance Petroleum, Jamnagar.

2000

30
They exported 2.42 Lac. Qtls. of Sugar to Pakistan.

Pioneered joint manufacturing concept for gearboxes -supplied 25 MW retrofit supply to L and T,

Awarpur as replacement to Renk Germany.

2002

BPR initiatives - Complete system on SAP, BPR by Accenture.

2003

Gear Box Unit reaches 5000 mark of dispatch of gearbox/gearset.

2004

In December 2004, we commissioned our first co-generation plant at Deoband with power

generation capacity of 22 MW.

2005

They crushed 186.61 lac. Qtls. of cane during season 2004-05 which was the highest crush in India

with highest production of 19.59 lac. Qtls. of Sugar.

In September 2005, we commissioned our co-generation plant at Khatauli with power generation

capacity of 23 MW

Secured first ever Indian order for CEDI based Boiler Feed Water Treatment Plant of 85 M3/Hr.

capacity for Khatauli Cogen Plant.

First vertical roller mill gearbox of 70 tons - supplied as indigenous replacement to Flender Bocholt

Germany to cement industry.

31
 Products and Services

Triveni Engineering Ldt has provide the following products

 Sugar Production
 Cogeneration
 Distillery

The detail Information about them is given below.

Sugar Production

Business overview

Triveni's association with the Sugar Industry is as old as the Industry itself. In pre- independence

India, the promoters of what is now the Triveni Group established several sugar factories in pre

independent India. Even now, Triveni is the pre- eminent name in the Indian sugar industry.

With a current cane crushing capacity of 61,000 TCD (Tonnes Crushing per Day), the Triveni

Group continues to be one of the largest producers of sugar in India. The crush capacity of the

existing plants are (as follows;

 Khatauli, in District Muzaffarnagar (16,000 TCD)
 Deoband in District Saharanpur (14,000 TCD)
 Ramkola in District Kushinagar (6,500 TCD)

32
  Sabitgarh in District Bulandshehar (7,000 TCD)
 Chandanpur in District J P Nagar (6000 TCD)
 Raninagal in District Moradabad (5500 TCD)
 Milak Narainpur in District Rampur (6000 TCD)

The new capacities at Chandanpur, Raninagal & Milak Narainpur together with the brownfield

expansion at Ramkola were commissioned during the sugar season 2006-07.

All seven sugar factories are located in the state of Uttar Pradesh. In all the factories.

The sugar produced at Triveni's factories is direct consumption plantation white low ICUMSA (an

International method for determining colour value of sugar, lower value means whiter sugar), bold

grain sugar which commands premium in the market. A lot of emphasis is placed on the quality

control procedures and quality of sugar produced in the factories.

At all the factories, emphasis is on usage of energy efficient systems, modern technology and R &

D for better operations and for improved per hectare sugar output. As a result of Triveni's tie up

with Sugar Research International of Australia, the group factories have access to modern

equipments & process knowhow.

Khatauli, Deoband & Sabitgarh plants are located in fertile, well irrigated and high cane intensity

region of western Uttar Pradesh where the sugar cane crop is least dependent on the vagaries of

the Monsoon & therefore are very consistent in terms of the cane availability & capacity utilization.

The Ramkola unit is located in lucrative eastern UP where the realization of sugar (particularly

because of the robust demand from sugar deficient West Bengal) is better as compared to western

UP. The three new sugar units are located in the Central UP.

The cane development activities taken up by the factories are regarded to be amongst the best in

the industry. Group has been pioneer in using modern techniques like Satellite tracking for getting

information on area in its command for enabling decisions on which variety to be propagated in

33
which area. Factory has huge data base on individual farmer's field data (total cane area, past

supplies, ratoon and plant cane acreage, soil details, land type details etc.) to take prudent

decisions on cane development.

http://www.trivenigroup.com/sugar/sugar-overview.html - top#top

Factory at a Glance
Key performance indicators 2005-
06 Season :
 Total cane crushed -138.66
Lac
 Total losses % cane -2.01
%

 Bagasse saving -most of the

saved bagasse used in the
cogeneration plant

Overview

It is the second largest sugar unit of Triveni, which was

established in the year 1932 & expanded in phases to

reach its present crush capacity of 14000 TCD . The

cane is procured from 48000 ha cane area with the

factory and from 45000 cane farmers. The cane

intensity is about 82 %.

In last couple of years, factory has been completely revamped and modernized. A little bit of

reorganization of the equipment was also taken up alongwith debottlenecking of various sections of

34
the plant. Modern equipment like continuous vacuum pans & syrup clarification system designed

by SRI Australia have been installed under modernization scheme of the plant. A part stream of

low pressure & low capacity boilers & power turbines operating at 11 ata pressure have also been

removed after installation of the cogeneration power plant. The performance of the factory now is

at par with the best sugar plants of India. Factory makes full use of the most modern high pressure

(87 ata) & temperature (515 degree C) cogeneration plant installed in 2004 to efficiently meet its

steam and power demand. In fact, the installation of the efficient cogeneration plant is also a main

driver to achieve further energy efficiency in the sugar plant to maximize bagasse savings and

power export to the state electricity grid. Factory has taken up a no. of steps to further

optimize/reduce the power consumption of the plant which include:

 Installation of high capacity DC motor driven centrfugals

 Automation of combustion control of the existing 32 ata boilers
 Automation of the spray & injection system
 Installation of planetary gear boxes
 Conversion of existing drives of centrifugals to DC drives

Other sections of the plant are being also planned to have better & energy efficient equipments in

next phase of the modernization.

The sugar produced at the factory is less than 100 ICUMSA (International standard for the sugar

colour measurement) value Bold grain sugar. The sugar produced by Deoband commands premium

in the market. Through aggressive cane development during last couple of years, factory has now

over 40% of it's command area under high sugar cane varieties. This helps the factory to achieve

better sugar recovery so as to be amongst the best performing factories in the state.

Major cane varieties in the factory are

35
 Early (High Sugared) Varieties General Cane Varieties
CoJ -64 CoS -767
CoS -88230 CoS -84212
CoS -8436 CoS -8432

Crushing Capacity & Output

As of March 31, 2005, our sugar mill located at Deoband had crushing capacity of 10,000 TCD.

Sugar production is dependent upon the quantity of sugarcane available for crushing and the

recovery percentage of sugar from sugarcane. In India, the production commences in October and

generally ceases by the end of April by which time the sugarcane available from the cane areas is

exhausted. The duration of the crushing period also determines the amount of sugar that is

produced.

The following table demonstrates the sugarcane crushed and the sugar production at oursugar mill

at Deoband.

Year 2004-2005 2003-2004 2002-2003

Sugarcane crushed (MMT) 1.38 1.48 1.62
Average recovery rate (% of sugarcane crushed) 10.19 10.46 10.13
Sugar produced from cane (MMT) 0.141 0.155 0.164
Sugar produced from raw sugar (MMT) - - -
Number of days in operation 175 160 181

Effluent Treatment & Discharge

36
 NENVIROMENT AND POLLUTION MANAGEMENT
PROCESS FLOW DIAGRAM FOR EFFLUENT TREATMENT AT E.T.P.

EFFLUENT WATER

PASSED THROUGH DESILTING CHANNEL FOR SETTLING SILT ETC.

OIL AND GREASE SEPARATION

MILK OF LIME ADDITION (pH= 7.1 - 7.2 )

SETTLING IN ANAEROBIC TANKS - COW DUNG ADDITION TO DEVELOP BIOMASS

AERATION IN AEROBIC TANKS - ADDITION OF UREA AND DI - AMMONIUM

PHOSPHATE AS NUTRIENT FOR BACTERIA

SETTLING IN CLARIFIER

SETTLED SLUDGE SEND TO SLUDGE DECANTED CLEAR TREATED WATER FOR

DRYING BEDS DISCHARGE

Environment & Pollution Control

Boiler Operation & Air Pollution Control

For the generation of 190 tons of steam per hour the unit is operating total 6 nos. of boilers all

fitted with air pollution control device "Multi-Cyclone". These Multi-Cyclones are working quite

efficiently & giving more than 95 % reduction in SPM level of boiler flue gases.

The SPM available at Stack is well within the limit. Stack monitoring is done periodically and

continual improvement in environmental performance is always underlined policy of every

development in boiler section.

At our unit in Deoband, we comply the applicable environment laws for air & water.

37
Product Quality

The commercial grading of sugar in India is based on grain size and colour categories. Currently 3-

grain sizes and 3 colour series are identified.

GRADE GRAIN SIZE

L > 1.70 - mm
M 1.18 - 1.70 mm
S 0.60 - 1.18 mm

Deoband Sugar Quality

In India bold grain carries a premium. Keeping that in mind Deoband unit produces sugar of bolder

grain of low colour value. The production is approximately categorised as following, though it
varies

from year to year -

L-31 19%
M-31 74%
S-31 7%

Sugar is statutorily required to be packed in 100 Kg twill jute bags.

Plant Equipment

» I. JUICE EXTRACTION
» II. CLARIFICATION
» III. EVAPORATION
» IV : VACUUM PAN STATION

38
 » V. CRYSTALLISER TREATMENT AND CURING
» VI. STEAM AND POWER PLANT
» VII. COGENERATION
» VIII. GENERAL

Key Efficiency Figures

Following key efficiency figures have been determined to assess the performance of the factory.

Results of Deoband unit falls in close vicinity of the best obtained. Some of the results are

summarized as below:

EFFICIENCY DATA APPROX VALUE

CRUSH 11,000 - 12,000 Tonnes Per Day
DMF 70 -71
JAWA RATIO 81 - 82
CLARIFICATION EFFICIENCY 1.6 - 2.0
MILL EXTRACTION 95.5 - 96 .4
RME 96.5-97.0
BOILING HOUSE EXTRACTION 87 - 88
ROA EXTRACTION 87 - 88
RBHR 91 - 92
TOTAL LOSSES 1.95-2.0
SUGAR RECOVERY 10 - 11 %
MOLASSES RECOVERY 4.5 - 5 %
SUGAR PRODUCTION 1,60,000 Tonnes per annum ( Approx.)

Raw material

39
It is very important that sugarcane of the appropriate variety is available to our sugar mills at the

appropriate time and in sufficient quantities. Hence, sugarcane procurement and development are

fundamental to our sugar business. In view of the same, we have a separate department with

experienced personnel, who handle sugarcane procurement and sugarcane development. In the

state of Uttar Pradesh, sugarcane is procured through cooperative societies formed by sugarcane

growers in the cane area. The sugarcane co-operative societies, based on their estimates of

sugarcane production by their members enter into agreements with us for the supply of identified

quantities of sugarcane at a price determined in accordance with applicable laws. This enables us to

get an estimate of the sugarcane available for crushing and plan our operations accordingly.

Our sugarcane development programme is planned to, inter alia, educate the farmers regarding

modern agricultural practices in sugarcane cultivation, supply of seeds, encourage replacement of

inferior sugarcane varieties with varieties which are high yielding, have high sucrose content and

are early maturing, encourage measures to eliminate diseases and insects/pests in sugarcane,

recommend fertilisers based on soil testing, contributing for construction and repair of link roads

and culverts, maintenance of drainage systems, etc, for the development of infrastructure to

promote sugarcane cultivation.

We use information technology for classification and indenting of sugarcane in our sugarcane

procurement system. Such systems enable us to access details about the land holdings, area under

sugarcane cultivation, last few years supply of sugarcane to the factory, etc, which are used to plan

sugarcane procurement and sugarcane development. Farmers are advised on sowing of the
sugarcane varieties based on details collected by us on land type, soil details, etc.

40
We actively encourage the farmers in our cane areas to grow early maturing varieties of sugarcane,

which have high sucrose content. We conduct sugar content analysis of sugarcane samples on a

daily basis to have information base for our procurements and future development of high sugared

sugarcane varieties. Some of these varieties are CoJ-64, CoS-88230 and CoS-8436, which are

varieties which have been identified as early maturing sugarcane varieties by the government of

Uttar Pradesh and the SAP is higher than the SAP for general varieties by Rs.30-50 per metric
tonne

for these varieties of sugarcane. The areas on which sugarcane with high sugar content is being

grown in the Cane Areas of our sugar mills is detailed in the table below:

Khatauli Deoband
Total land under % of land under Total land under % of land under
cultivation of sugarcane cultivation cultivation of sugarcane cultivation
CoJ-64 17.20% CoJ-64 15.38%
CoS-88230 10.94% CoS-88230 26.79%
CoS-8436 3.11% CoS-8436 12.33%

We are focussed on using varieties of sugarcane, which have higher sugar content for crushing in

our sugar mills. The major varieties of sugarcane used in our sugar mills in Khatauli and Deoband

and the amount used in the last three Sugar Years are as detailed in the table below:

Quantity (Thousand Metric Tonnes)

Khatauli Deoband
2002-03 2003-04 2004-05 2002-03 2003-04 2004-05

41
 CoJ-64 251.0 364.2 377.6 198.7 230.9 309.5
CoS-88230 293.8 230.8 266.8 150.0 222.2 352.2
CoS-8436 320.4 208.9 57.6 343.4 302.3 367.4
CoS-767 1075.9 1074.7 913.1 909.6 717.0 360.8
CoS-84212 40.2 3.0 3.0 3.0 3.0 2.2
CoS-8432 42.0 30.8 31.5 7.0 3.3 3.0

The percentage wise breakup of the use of sugarcane varieties in our sugar mills in the last three

Sugar Years, are as detailed in the table below:

Percentage of total sugarcane crushed in Sugar Year (in %)

Khatauli Deoband
2003 2004 2005 2003 2004 2005
CoJ-64 15.0 21.0 22.0 12.0 16.0 22.0
CoS- 88230 17.0 13.0 15.0 10.0 12.0 25.0
CoS-8436 2.0 2.0 3.0 20.0 23.0 26.0

In the Sugar Year 2005, at Khatauli we received approximately 33.00% of the sugarcane crushed

by the factory at the gate of our sugar mill and 67.00% of the sugarcane crushed was procured

through 220 sugarcane collection and purchase centres. In Deoband unit we received 47% of the

total sugarcane crushed at the gate of our plant and 53% from collection and purchase centres. At

our Ramkola unit we received 70% sugarcane at the gate of our sugar mill and 30% from the

collection and purchase centres.

42
Cane Development Programme

The philosophy of the cane development and marketing is almost common for all the sugar units.

While in following paragraphs, description is for Khatauli but applies generally to Deoband &

Ramkola units as well.

After identifying the constraints in the area of operation, the mill has undertaken an ambitious

programme of Cane Development for improvement in productivity and quality of cane. The mill

has separate cane development wing with qualified staff and experienced personnel. For this

purpose the operational area has been divided into sub-zones and the field supervisory staff has

been provided with the necessary facilities for efficient working and proper supervision of the

various cane development activities.

The cane development programme is planned with following activities:-

 To educate the farmers regarding modern agricultural practices in sugarcane cultivation.

 To replace the unapproved and degenerated cane varieties

 To initiate and propagate the use of healthy and generically pure, seed material.

 To initiate heat therapy for the treatment of cane seed through moist hot air treatment plant

43
 to eliminate the diseases.

 Fertilizers recommendation based on soil testing.

 Supply of press mud on subsidized cost for improving the soil fertility.
 Distribution of agro-chemicals on subsidized rates.

 Incentive for high sugared varieties like CoS-88230, CoS-8436, CoJ- 64/85 and CoS-88230

in the early group and CoS-8432, CoP-84212 in the mid and late group.

 Three tier seed nursery programme for multiplication of disease free good quality seed.

 Propagation of newly released high yielding and high sugared cane varieties.

 Contribution of funds with cane development councils for construction/repairing of link

 roads and culverts for the development of infrastructure.

 To layout the demonstration/trial plots to demonstrate yield potential and better/improved
cultivation techniques.

The details of various schemes of cane development being undertaken by mill are enumerated as

below:-

44
 » Plantation of High Yield Variety of Sugarcane
» Seed Distribution
» Demonstration Plots
» Technical Assistance to Cane Growers
» Moist Hot Air Treatment
» Irrigation
» Ratoon Management
» Biological Laboratory
» Soil Analysis and Soil Treatment
» Control of Post Harvest Sugar Losses
» Awareness Among Cultivators

For Triveni, sugar to sugar plant & machinery was a natural diversification. Triveni entered in this

field in mid 60s and has been a major player in this business area of sugar machinery & turnkey

sugar plants.

This division has executed more than 35 sugar plants ranging from 1000 TCD - 10000 TCD

capacity and carried out major expansion, balancing work for over 20 sugar factories.

The mills designed by Triveni are considered by experts to be very robust and rugged, requires

least maintenance and give higher mill extractions.

Triveni got out of the business of complete new sugar units installation as it started focussing on

niche technology and equipment available because of tie up with SRI, a premier sugar research

institute of Australia and industry turning to low cost small players (at a time when sugar industry

was going through bad phase) started eating away the profits made by this division.

Now, Triveni SRI Limited (TSL), a Triveni Group Company, under a License Agreement with

45
Sugar Research International, offers the latest models of plants and machinery available to the

Australian industry to the Indian Sugar Industry.

Our strong position in sugar production is a direct result of our emphasis on the usage of modern

technology, energy efficient systems and research and development. Our subsidiary, Triveni SRI

has an agreement with SRI, which enables us to equip our plants with modern equipments and

process know-how. We have installed Continuous Vacuum Pans (CVPs) developed by us in

association with SRI at our Khatauli and Deoband sugar mills. These CVPs consume less steam for

massecuite boiling and are therefore more efficient. We have also installed a Syrup Clarification

System (SCS) at Deoband and Khatauli sugar mills for improvement in quality of the sugar.

We are also in the process of installing a Short Retention Clarifier (SRC) at Khatauli sugar mill and

plan to use the same in the new plants. In a normal clarifier, juice is retained for approximately 150

minutes while the SRC, takes 30 minutes for the same. The reduced time prevents inversion of

sugar and thereby improves sugar recovery and quality. At our proposed Sabitgarh unit we plan to

use VFDs to rotate the mills, which will reduce energy consumption and minimise energy

requirement at lower operating load.

The factory follows the standard double sulphitation process of clarification and 3 1/2 massecuite

boiling scheme for production of direct plantation white sugar in accordance with following flow

diagram:-

46
PROCESS FLOW DIAGRAM

47
We have co-generation plants in Deoband and Khatauli that are located in Western Uttar Pradesh

("Co-generation Business"). In a sugar mill, bagasse, which is a by-product, is used for production

of electricity and steam through a co-generation plant. Co-generation plants are used to produce

two forms of useful energy simultaneously i.e. electric power and steam, with the surplus electric

power being supplied to the power distribution company(ies). While we have had captive power

plants in our sugar mills for a number of years, we started the co-generation of electricity with the

commissioning of the new co-generating plant in Deoband on December 5, 2004. This facility has a

capacity of 22.0 MW and the surplus electric power is being supplied to Uttar Pradesh Power

Corporation Limited ("UPPCL") under a power purchase agreement for a period of 10 years. In the

Khatauli unit, in 2005, a 23 MW co-generation unit was set up as phase 1 while in 2006, another 23

MW cogeneration facility was set up as Phase II. The aggregate cogeneration capacity as on date is

68 MW out of which approx. 43-45 MW of electricity is exported to the grid.

Triveni is operating a 14,000 TCD capacity sugar unit at Deoband in District Saharanpur, Uttar

Pradesh. As a result of modernisation activity taken up at Deoband, there was substantial reduction

in process steam consumption and therefore increased availablity of bagasse. It was decided to use

the additional savings of bagasse as result of the modernisation of the plant synergitically in a high

pressure & temperature efficient cogeneration power plant at Deoband.

The plant has been installed nearby the existing sugar factory and suitable interconnections have

48
been made to use the exhaust steam & electricity from the cogen plant to the sugar factory & fuel

conveyors for conveying bagasse from the sugar factory to the cogen plant.

Deoband sugar unit is located in high cane intensity western UP region and therefore has assured

availability of raw material (Sugarcane) for crushing and therefore assured availability of bagasse
to run the cogen plant.

The plant & machinery of the cogeneration plant at Deoband consists of the following
 120 tph 87 ata/515 degree C high pressure/temperature boiler
 22 MW double extraction condensing type TG set
 All auxilliaries (Includes cooling towers, water treatment plant, fuel & ash handling system,
power evacuation system among others)

The cogen plant at Deoband was commissioned on 5th of December 2004. The surplus power (after

meeting the sugar factory's requirement and cogeneration plant's in-house requirement) is exported

to the UPPCL, for which Triveni has a Power Purchase Agreement.

The temperature & pressure configuration selected for our cogeneration plants is one of the most

modern and state of the art. The conversion of total enthalpy of steam in an 87 ata cycle is one of

the highest.

The engineering of the plant has been done by M/s. Avant -Garde Engineers & Consultants of

Chennai who are the most reputed consultants in bagasse based cogeneration in India.

Being run by an environment friendly fuel (bagasse) this process does not add to nett Carbon

Dioxide (a greenhouse gas) into the atmosphere.

The cogeneration plants are eligible to get funds from Developed countries under Clean

Development Mechanism (CDM) under Kyoto Protocol. Under CDM, the green projects generate

carbon credits (CERs) which can be sold to generate revenue.

49
Carbon credits are available to companies involved in developing and implementing projects that

reduce green house gas emissions, thereby generating carbon credits that can be sold in the carbon

market. The carbon credits are referred to as Certified Emission Reductions (CERs).

In annex 2 countries like India, these credits are earned by implementing 'green projects' under a

Clean Development Mechanism or CDM. These are validated and registered with the United

Nations Framework Convention on Climate Change (UNFCCC), which also issues carbon credits

after verification.

Company's co-generation plants at Deoband and Khatuali Phase 1 have already been registered

with UNFCCC.

The Company's Cogen unit at Deoband has generated 1,90,000 Emission Reductions or ERs from

November 04 to March 07 . These carbon credits have been verified and cleared by Executive

Board of UNFCCC.

Going forward, on an ongoing basis, the company would be accruing 200,000 CERs per annum

from all the three cogeneration units.

50
Molasses, the by-product generated during the manufacture of sugar is fermented and distilled and

variants of alcohol are manufactured.

The 160,000 litre distillery unit, with state of the art equipment and bio-methanation process, is

located at Muzaffarnagar which is equidistant from two of our major sugar manufacturing facilities

of Khatauli & Deoband. This will ensure security of raw material.

The distillery business group caters to three main segments:

 Used in Industrial applications
 Used in Potable liquor manufacturing
 Used as a Fuel - Ethanol

The company is already supplying to all the leading customers in the abovementioned first two

segments. Its products have been very well accepted as they are meeting all the specifications. The

company has also started supplies of ENA to UB Group.

The Company also has the capability to produce fuel ethanol. It is presently not supplying fuel

ethanol under 5% blending programme as it was not qualified for the tender floated by the oil

marketing companies as its capacities come up after the tender were floated. However recent

announcements through press release that fuel ethanol would be made mandatory at 5% blend

(and 10 % optional from October, 07) and raised to 10% mandatory blending from October 08

51
would enable new tenders to be issued soon and we expect to have ethanol supplies for our

distillery unit to commence. The government has also allowed the use of cane juice for producing

ethanol. The company is well positioned to qualify for the tenders once blending is raised to 10%.

The alcohol (other than fuel ethanol in the country would thereby find another outlet raising

realizations significantly across all segments.

Introduction

Sugarcane cultivation and development of sugar industry runs parallel to the growth of human
civilisation and is as old as agriculture. Though sugarcane is considered to have spread to India
from Polynesia, the importance and use of sugarcane and sugar in the country’s socio-economic
milieu is deep-rooted and immense. In the present scenario too, sugarcane and sugar continue
to be important for India’s rural economy. Sugar industry has been a focal point for socio-
economic development in rural areas by mobilising rural resources, generating employment
and higher income, transport and communication facilities. About 4 million sugarcane
farmers and large number of agricultural labourers are involved in sugarcane cultivation and
ancillary activities, constituting 7.5 per cent of rural population. Besides, the industry provides
employment to 5 lakh skilled and semi-skilled workers in rural areas. Other typical features of
sugar sector include,

(i) sugar as an essential commodity although 75 per cent of available sugar is

consumed in bulk, viz., industrial and small business segments;
(ii) sugar industry has to pay higher prices (state advised prices) than the recommended
statutory minimum prices;
(iii) high variability in yield and area;
(iv) decline in crushing period and its adverse effect on viability of sugar processing
units;

52
 (v) mills not equipped to make refined sugar and
(vi) lack diversification of activities in favour of co-generation and ethanol production.

Production of Sugarcane and Sugar

Apart from sugarcane being an important cash crop, it ranks third in the list of most
cultivated crops after paddy and wheat. India is one of the largest sugarcane producers in the
world, producing around 300 million tonnes of cane per annum. Production of sugar is
the second largest agro-processing industry in the country after cotton and textiles. India
also happens to be the second largest sugar producing country (after Brazil), contributing 15
per cent to white crystal sugar production. Further, India is the only country that produces
plantation white sugar unlike other countries that produce raw or refined sugar or both.

Sugar Processing

India has 566 sugar mills in the country, of which 56 per cent are in the co-operative
sector,
34 per cent in the private sector and the remaining 10 per cent are in the public sector. These
processing units are located in 80 major districts and a large number of these units are
in Maharashtra (142 in the co-operative sector and 12 in the private sector during 2008-09)
and Uttar Pradesh (28 in co-operative sector, 64 in private sector and 22 in public sector as
at end
2005-06). The increased number of sugar factories has affected the availability of sugarcane for
processing and in turn the viability. Most of these processing units work for six months in a
year (September to May) and the capacity varies from 750 to 10,000 tonnes per day. For the
triennium ending 1999-2000, the 367 processing units worked for an average period of 148
days whereas
425 units for the triennium ending 2004-05 worked for just 112 days. This was due to increased
number of units as well as capacities. Existing prices of sugar (Rs.1,600 per quintal), molasses
(Rs.3,500 per tonne), rectified spirit (Rs.25 per litre) and bagasse (Rs.1,200 per tonne) are not

53
enough to pay farmers and is an area of concern.

Objective

The studies have analysed the economics of sugarcane cultivation and sugar production for
the reference year 2005-06. The studies have clearly brought out that sugarcane cultivation
especially in Haryana and Uttar Pradesh was not an economic proposition/ profitable
venture as the returns received were insufficient to cover all costs, particularly when
family labour was accounted for. In the case of sugar processing as well, the studies observed
that by and large, sugar processing as a solo activity did not work out to be a viable
proposition for the sugar mills. Two of the three states selected for the study were from sub-
tropical region (Uttar Pradesh and Haryana) and one was from the tropical region (Karnataka).

The presentation is divided into five sections. Section I reviews the trends in area, production
and productivity of sugarcane, etc., while Sections II explains the coverage of the study.
Section III discusses in detail the

(vii) trends in area, production and productivity of sugarcane,

(viii) economics of sugarcane cultivation and
(ix) sugar production in Uttar Pradesh, Haryana and Karnataka.

54
 Analysis and Interpretation

Section I Trends in Area, Production and Productivity of Sugarcane

India ranks second, next to Brazil in terms of area (4 million ha.) and sugar production (26.4
million tonnes). Between 1961 and 2005, the production of sugarcane increased at compound
annual growth rate (CAGR) of 2.7 per cent. It was due to increase in area (1.5%) and
improvement in yield (1.2%). Though the average productivity of sugarcane (62.8 MT/ha.)
continues to be low vis-à-vis Brazil (71 MT/ha.), it is comparable to other leading sugarcane
growing countries like Thailand (70 MT/ha.), China (64 MT/ha.), etc. Between the trienniums
ending 1999-2000 and 2004-05, the area under cultivation, sugarcane production and sugar
production increased by 19.6, 20.7 and 60.7 per cent, respectively (Table 1). The latter could be
attributed to changes in usage of sugarcane from gur/khandsari to sugar
1
production .

55
 Table 1: Sugarcane in India - Some Facts
Particulars Triennium Ending
1999-00 2004-05
Area ('000 ha) 3,349 4,006 (4798.03)
Production ('000 MT) 2,08,448 2,51,613
Yield (MT/ha) 62.2 (3,27,437.6)
62.81 (68.24)
Recovery (%) 9.93 10.25
Cane crushed (% of 46.5 59.83
production)
Avg. Duration (days) 148 112
Sugar Prod. ('000 MT) 9,617 15,459
Sugar factory (No.) 367 425
Avg. Crushing Capacity (TCD) 1,946 3,368
Source: Various issues of 'Indian Sugar' of Indian Mills Association and 'Co-operative
Sugar'.
Figures in parentheses refer to triennium ending 2007-08 (CMIE, January 2009, pg.
348).

However, sugar recovery has stagnated at 10 per cent for the last few years vis-à-vis
Brazil (>14%). The crop’s performance during 1980’s and 1990’s followed similar trend
although decline has been observed mainly since 2000 due to moisture stress, pests and
diseases,
high cane price arrears especially during 2002-03, etc. More importantly, after 2000-01,
the

56
growth rate of all parameters is negative. This is mainly on account of drought and
2
pest infestation in major sugar producing states during 2003-04 and 2004-05 (Table 2).

Table 2: CAGR for Area, Production and Productivity

**
Period Area Production Yield
1980-81 to 1989-90 2.94 4.31 1.33
1990-91 to 1999-00 1.53 2.43 0.89
1996-97 to 2005-06 -0.22 -1.39 -1.17
*
2000-01 to 2005-06 -0.83 -2.71 -1.9
1950-51 to 2005-06 1.62 2.78 1.14

*: In recent years, increased international prices have encouraged

processing units to offer better prices so that farmers plant more area
under sugarcane. At all-India level, the area under sugarcane
increased from 3.66 million ha. during 2004-05 to
4.13 million ha. during 2005-06 and 4.42 million ha.
during 2006-07.
**: Between 1995-96 and 2005-06, the sugarcane production varied
substantially across the years although the co-efficient variation was
13.5%.
Source: (a) CMIE, March 2006. (b) Indian Sugar
Mills Association. (c) CACP website.

1. Land use statistics also indicated that over the last two and a half decades, the area
under sugarcane cultivation in percentage terms increased from 1.5 in 1980-81 (2.7 million ha.)
to 2 in
3
1990-91 (3.7 million ha) and to 2.2 in 2005-06 (4.2 million ha.) . In the case of
sugarcane
production, the decadal growth rate reflects an increase from 2.19 per cent between 1980-81
and
1989-90 to 2.74 per cent between 1990-91 and 1999-2000. The period 1996-97 to 2005-06,
4
however, shows a higher growth at 3.67 per cent .

2. Though primarily a tropical crop, cultivation of sugarcane is distributed over two

agro- climatic zones-the sub-tropical and the tropical. In India, most of the sugarcane
cultivation is concentrated in the sub-tropical zone (Uttar Pradesh, Uttarakhand, Bihar, Punjab,
Haryana) that accounts for 67 per cent of the area and 62 per cent of the production. Though
the tropical zone (Maharashtra, Andhra Pradesh, Gujarat and Karnataka) accounts for 33 per
cent of the area, it contributes 38 per cent of the production owing to high productivity.

3. The distribution of area under sugarcane cultivation indicates that large farmers (59%)
contribute more area to sugarcane crop as compared to small/ marginal farmers (41%) (Table
3).

Table 3: Area under Sugarcane for Different Size of Land Holdings at All-India Level
Per cent
<0.2 ha 0.2-0.5 ha 0.5-1.0 ha 1-2 ha 2-4 ha 4-10 ha > 10 ha Total
0.8 5 11.8 23.80 29.00 25.00 4.6 100.00
Source: Uttar Pradesh Report, 2008, pg. 12

Section II Coverage of the Study

4. As already stated, sugarcane is cultivated in both tropical and sub-tropical regions of the
country. Maharashtra and Uttar Pradesh, each representing one of the regions constitutes the
largest producers of sugarcane in the country. The study analyses, sugarcane cultivation
and sugar production in three states- Uttar Pradesh, Haryana and Karnataka. Two of the three
states selected for the study were from sub-tropical region (Uttar Pradesh and Haryana) and one
was from the tropical region (Karnataka). While, Karnataka represented highest compound
annual growth in area between 1951-2004 (4.42%), Haryana represented stagnancy in acreage
under sugarcane. Further, as of 31 March 2005, of the 197 non co-operative and/or private
sugar mills,
78 were located in Uttar Pradesh followed by Tamil Nadu, Andhra Pradesh and
Maharashtra. Uttar Pradesh alone accounted for 79 per cent of the sugarcane area of the sub-
tropical region. Thus, the selected states represented both types of agro-climatic regions, as
well as features of the sugar sector like state/s with stagnant area, fast acreage growth,
existence of large number of sugar processing units in private sector, etc.

5. The reference year considered for the studies was 2005-06 and covered 90, 60 and 40
sample sugarcane growers in Uttar Pradesh, Haryana and Karnataka, respectively. To
understand the economics of sugar processing, a sample of three sugar mills (2 co-operative & 1
private) in Haryana, six (3 co-operative, 2 private & 1 not included) in Uttar Pradesh and
six (3 co- operative) in Karnataka were studied.

Section III Study Findings

A. Area, Production and Productivity – Uttar Pradesh, Haryana & Karnataka

13. The trends in area, production and productivity across Uttar Pradesh, Haryana and
Karnataka have been analysed in this sub-section, based on the study reports of these states.
These three States account for 60 per cent of the area and production under the crop. Further,
these States

also reflect the different agro-climatic situations. At the state level too, the distribution
of sugarcane according to size of land holding follows the all-India pattern (Table 3). In
5
Uttar Pradesh , large/other farmers contribute 55 per cent of the area under cultivation as
6
against 45 per cent by small and marginal farmers (SF/MF). However, in Haryana , SF/MF and
large/other farmers contribute 67 and 33 per cent of the cultivated area, respectively.

7
6. Average growth in area, production and yield for the period 1995-96 to 2003-04 reveals
a decelerating (negative) growth trend at the aggregate as well as the State level (Table 4)
except Haryana.

Table 4: CAGR in Area, Production and Productivity of

Sugarcane between 1995-96 and 2003-04
Per cent
State/s Area Production Yield
Haryana 1.43 1.81 0.37
Uttar Pradesh 0.97 -0.15 -1.11
Karnataka -3.81 -6.72 -3.02
All-India -0.38 -2.09 -1.72

7. Marginal increase in area under sugar cane in Uttar Pradesh and Haryana could be attributed
to relatively higher State advised prices than the minimum statutory prices. For instance, state
advised price for sugar cane was Rs.123 per quintal in Haryana during 2005-06 as against the
minimum statutory price of Rs.80. However, during 2008, sugarcane acreage contracted by
 16.7% to 44 lakh ha. (as against 53 lakh ha. during 2007) and the decline was more in Uttar
Pradesh as well as Maharashtra. In Uttar Pradesh, the decline was a result of the shift towards
8
paddy cultivation .

8. The variability in terms of coefficient of variation for area, production and yield
was substantial for Karnataka than the all-India estimates (Table 5). The level of variation
observed was least in Uttar Pradesh (< all-India). The variability in terms of area under
cultivation was associated with the increase or decrease in sugarcane production, which
further impacted the
capacity utilisation of the sugar mills. This therefore, highlights the need for bringing
about

stability in the cultivation/production process of sugarcane. Similarly, the variability in yield

points out the need for taking effective measures towards improving and stabilising productivity.
The sugar recovery percentage which is lesser than Brazil’s (>14%) is witnessing stagnation over
the last few years. The improvement in sugar recovery may help in improving export
competitiveness as well (discussed in Section IV).

9. Average yield of sugarcane at the aggregate level is 67.4 quintal per ha. although it varies
substantially across the States and is higher in the tropical region (Maharashtra, Gujarat, Andhra
Pradesh, Tamil Nadu, Karnataka, Orissa and Kerala) than the sub-tropical (Uttar Pradesh, Bihar,
Punjab & Haryana, West Bengal, Assam, Uttarakhand, and part of Madhya Pradesh).
These variations are attributed to the agro-climatic conditions of the states/regions. The yield of
sugarcane in the tropical and sub-tropical region was 73 MT/ha. and 57 MT/ha., respectively,
for the triennium ending 2004-05.

Table 5: Extent of Variability in Sugarcane Cultivation during

the period 1996-97 to 2005-06
Per cent
Coefficient of Variation Area Production Yield
* *
Haryana 12.72 12.91 2.89
* *
Uttar Pradesh 5.23 5.73 3.63
Karnataka 26.22 34.65 13.81
All-India 6.17 8.47 5.62

Source: (i) Handbook of Statistics on the Indian Economy, 2006-07,

RBI, pg 51-63. (ii) Karnataka Study Report, 2008, pg. 22. (iii)
Haryana Study Report, 2008, pg.11
 *: For the period 1996-97 to
2003-04.

10. Greater investment in R&D need to be encouraged to evolve disease/pest resistant

varieties, adoption of water management and improved farm practices by the farmers to
enhance and stabilize the cane productivity.

B. Economics of Sugarcane Cultivation in Selected States

11. The economics of sugarcane cultivation in the selected states (Uttar Pradesh, Haryana
and Karnataka) varied substantially, depending upon its agro-climatic conditions, nature of
crop (planted or ratoon), variety grown, input use, etc. Being a water-intensive crop, availability
of
adequate water was a crucial factor which was determined by the rate of rainfall received and
extent of irrigation available. This affected the cost of cultivation. The cost-return analyses
of sugarcane cultivation in these three States have been presented in Table 6.
 Table 6: Economics of Sugarcane Cultivation
Particulars / Crop Uttar Pradesh Haryana Karnataka
Type Planted Ratoon Planted Ratoon Planted Ratoon
1. Cost of cultivation (Rs./ha.)
1.1. Seeds 8075.37 0.00 11485.50 0.00 10977.79 1270.22
1.2. Fertilizers 4499.75 5149.85 8274.50 7163.00 13637.02 12676.11
1.3. FYM 1494.47 0.00 11607.22 7245.05
1.4. Irrigation 2495.66 3393.90 2964.00 3087.50 54.20 0.00
1.5. Hired Labour 3683.14 1312.61 19513.00 23465.00 15872.24 14672.99
1.6. Cost A1 35664.16 24295.17 52652.99 44966.35 - -
1.7. Cost A2 35664.16 * 24295.17 * 56357.99 48609.60 81355.16 59706.82
1.8. Total Cost (A2+FL) 56417.37 45906.53 61174.49 54661.10 84078.97 65304.87
2. Yield (Qtl./ha.) 572.64 600.21 602.68 518.70 994.67 1030.98
3. Price realised (Rs./qtl) 102.05 102.05 111.00 111.00 113.32 113.32
4. Value of Output (Rs.) 58438.40 61251.43 66897.48 57575.70 112717.88 116832.49
5. O/P value at farm 52939.54+ 54570.48+ 59858.18 51584.72 102058.40# 105953.79#
gate [4- marketing cost]
(Rs.)
6. Net Returns (Rs./ha.)
6.1. Over cost A1 (5-1.6) 17275.38 30275.31 7205.19 6618.37 102058.40@
105953.79@
6.2. Over cost A2 (5-1.7) 17275.38 30275.31 3500.19 2975.12 20703.24 46246.98
6.3. Over Total Cost -3477.83 866.94 -1316.31 -3076.39 17979.42** 40648.92**
(5-1.8)

12. The cost of cultivation without accounting for family labour ranged between
Rs.35,664/ha. (Uttar Pradesh) and Rs.81,355/ha. (Karnataka) for planted crop and between
Rs.24,295/ha. (Uttar Pradesh) and Rs.59,707/ha. (Karnataka) for ratoon crop. If only the paid-
up costs are considered, then the returns realised for both planted and ratoon crops are
positive. However, after accounting for imputed value of family labour, the cost
increased by an average of 8 per cent for both types in Haryana and Karnataka, while in Uttar
Pradesh an average
increase of 75 per cent was observed. Sugarcane cultivation in this case turned out to
be
 unviable. In both situations, the cost of cultivation of ratoon crop was lower than the
planted crop owing to lesser expenditure on inputs.

13. The returns, based on the analysis, reveal that sugarcane does not work out to be a
profitable venture, especially in Haryana (both crops) and Uttar Pradesh (planted), particularly
when family labour was accounted for. Across the states, cost of hired labour, especially in
Haryana made substantial difference to the cost of sugarcane cultivation. As per CACP, value
of by-products constituted 4 per cent of the gross value of sugarcane. Further, in Uttar
Pradesh, labourers harvested the produce in return to the fodder portion of the crop. The
farmers sell the sugarcane mainly to the sugar mills at the State advised price although
sugarcane can be sold to the private crushers for production of gur. However, price available
from this source is not guaranteed. The returns were however, quite high in the case of
Karnataka. The reasons for such variations have been discussed in Table 7.

22. By and large, sugarcane production was not an economic proposition if all the costs
were accounted for. Relatively better returns in Karnataka were due to above normal rainfall
and high variability in area, production and yield has to be kept in view while interpreting the
results.

C. Economics of Sugar Production in Selected States

23. The state of sugar processing industry in the country too is not encouraging. The results
of the analysis (Table 8) clearly indicate that solo processing of sugar does not work out to
be a viable proposition for the sugar mills as the net returns range from negligible (Uttar
Pradesh) to negative (Karnataka). Capacity utilization of sugar factories in Karnataka was 146,
77 and 71 per cent during 2002-03, 2003-04 and 2004-05 as the sugar production varied from
18.68 lakh tones
during 2002-03 to 10.40 lakh tones during 2004-
9
05 .

14. At present, the sugar mills operate on an average for 148 days. This was
10
happening because of an increase in number of units and capacities . Deceleration and
variability in area

under sugarcane adversely affected the working period of the sugar mills. Further, to enable
minimum capacity utilisation by the mills, the radial distance between sugar mills should
11
be increased from 15 km to 25 km .

Table 7: Variations in Returns over Cost- Reasons

State/s Study Observation/s

Haryana • Availability of canal water was not timely and uniform. Farmers had to
resort to tube well irrigation thus inflating production cost.
• Farmers sourcing seeds from other farmers/sugar mills reported poor quality
& low cane production.
• Leasing-in of land practised in all farm categories- small, marginal & large &
increased production cost.
• Over usage of urea & under usage of super phosphate contrary to the
prescribed amounts.
• For both planted & ratoon crops, farmers recovered only the cost
of cultivation & family labour was not rewarded.
• Intercropping with wheat yielded net return upto Rs.1724 (including
family labour).
• Bank loan constituted 48% of cost of cultivation if imputed value of
family labour is considered and 53% if family labour is excluded.
U • gh presence of more pvt sugar mills with higher crushing
t du capacities.
t E ri • Harvesting cost lower in Azamgarh as labourers harvested
a x ng crop in return for
r p re fodder
P e fe portion of
r n re the cane.
a s nc • Prices realised by farmers, generally below SAP owing to,
d e e (i) diversion of
e s ye cane to gur/khandsari units; (ii) irregularities in distribution of
s ar cane cutting orders by mills / diversion of cutting orders of SF
h o as to large farmers, especially in the case of co-op mills &
n it societies.
w • Use of non-listed varieties having higher yield but low
p as recovery adversely affected the returns from sugar production.
e a
s no
t r
i m
c al
i ye
d ar.
e •
s
More
& area
under
c sugarc
h ane
e &
m better
i price
c realisa
a tion
l by
s farmer
s in
w wester
e n
r U
e P

n d
o u
t e

h t
i o
Karnataka • Rainfall during reference year was above normal (by 28% in Belgaum & 63%
in Mandya). Resultantly water availability for irrigation was quite adequate.
• Black cotton soil with suitable drainage facilities helped in high sugar
recovery (11.54% in Belgaum).
• Lower cost of production in case of ratoon crop was due to lower level of
input use.
• Harvesting and transportation charges to the mill were borne by the mill in
Belgaum.
rd
• Bank loans to sugarcane growers constituted only 1/3 of the cost of
cultivation.

Table 8: Economics of Sugar Production

Particulars Karnataka Haryana Uttar Pradesh
A. Crushing capacity (TCD) 4,519.22 9,911.88 4,629.98
+
B. Average days of working (No.) 132 150 146
# #
C. Average sugarcane crushed (’000 MT) 596.54 1,482.02 674.03
D. Sugar Recovery (%) 11.7 10.4 9.3
E. Sugar Production (’000 MT) 69.55 1672 349.02
*
F. Price of sugar realised (Rs./qtl) 1,623 1,935
G. Income from by- products (Rs./qtl) 76
**
H. Total Income [F+G] (Rs./qtl) 1,699 1,855.23 1,935
I. Cost of sugar production (Rs./qtl) 1,725 1,703.83 1,928.90
J. Net Income Realised [H-I] (Rs./qtl) (-) 26 151.40 6.10
K. Financial Rate of Return (%) Negative

TCD: Tonnes crushed daily. #: Worked out using the formula= working days % crushing
capacity.
*: Actual price realisation may be lower because of accumulation of sugar stock at factory level
as 38 to 69
per cent of sugar produced was not sold but for analysis purpose average price realized was taken
in the study
Further, the study has indicated falling trend in free sugar prices which is an area of concern.
+: Karnataka Report, 2008, pg.43.
**: Worked out assuming price retail sugar @ Rs.20/kg. Income from sale of by-products not
considered.
Source: NABARD’s Commodity Specific Study Reports of Uttar Pradesh, Haryana & Karnataka, 2008.

15. A look at the existing sugar marketing and procurement mechanism will probably help us to
understand the dismal situation of sugar mills in the country. Some have been discussed below.
a. Marketing of sugar like sugarcane is highly controlled and subject to government
restrictions. No producer/ importer/ exporter of sugar can sell/ dispose of/ deliver any kind
of sugar except under and in accordance with the direction issued by the Government.
b. The profitability of sugar mills is affected by the ratio of free sale quota to levy quota.
Though this ratio has been considerably reduced to 10:90, the sale of free sugar is subject
 to monthly release system.
c. Sugarcane alone accounts for 60 per cent of the cost of sugar production. Though the
Central Government fixes the Statutory Minimum Price (SMP) for sugarcane, the mills
have to procure sugarcane at State Advice Prices (SAPs) fixed by the State governments.
As the SAPs are invariably higher than the SMP, it affects the viability of processing.
d. There is a visible difference in the plant size and operational efficiency of the mills in the
private and the co-operative sector. For example, the co-operative mill at Sathion,
12
Azamgarh (UP) has reached junk level . Similarly, the co-operative mill at Kaithal
(Haryana) had high production cost owing to a very limited period of operation (56 days)
and low volume of cane purchased and crushed. Au contraire, the private mills were
13
comparatively more efficient and had lower operational costs .
e. To achieve operational efficiency, availability of sugarcane is required throughout the
season and requires proper management of raw material. It is however, difficult to ensure
owing to farmers harvesting more than the quantity ordered to clear their fields or diverting
cane to gur/khandsari units.

16. The studies observed that sugar processing, as a solo activity did not work out to be a
very profitable activity for the sugar mills. This was owing to factors such as, cost of
procuring sugarcane (at SAP in most states), conversion cost of sugar, restricted release of sugar,
etc. The profitability of the mills was further affected by restricted opportunities for
diversification. Two areas of diversification that can be seriously considered towards improving
the financial situation of the mills are ethanol production and co-generation. Further, delayed
payments by sugar mills and fall in crude oil prices may reduce the incentive to plant
sugarcane and may compound the problem of viability of sugar mills.

Ethanol Production

17. Though produced from both cane and corn, sugarcane is the most efficient source of ethanol
production owing to very high yields (approx 7,000 litres per ha.). Ethanol is also an efficient
bio-fuel and has witnessed increasing demand over the last few years owing to spiralling prices
of petrol & diesel. While use of pure ethanol as fuel requires specially designed/ modified
engines, ethanol blended petrol (EBP) do not have any such requirements. Till date, Brazil is the
largest producer and consumer of ethanol. Diversification into ethanol production would allow
Indian sugar mills to earn a steady income irrespective of the fluctuations in sugar prices.
However, except for Brazil, no other major ethanol producer has been able to produce ethanol at

12 UP is planning to privatise / completely sell-off 33 state-owned sugar mills in an effort to

reduce the burden of the loss-making units. All the 33 mills are owned by the UP State Sugar Co-
operation Ltd.; The Financial Express, January 15, 2009, pg. III.
13 Yamunanagar Sugar Mill in Haryana is a private mill with 150 crushing days, lowest
production cost (Rs.1527/qtl) and highest net returns (Rs.339/qtl) vis-à-vis Kurukshetra and
Kaithal Co-operative Mills, respectively. Haryana Report 2008, pg.
26. Average cost of sugar production of co-operative mills in Uttar Pradesh was higher (Rs.1,834
to Rs.1,929/quintal) than the private mills (Rs.1,624/quintal); Uttar Pradesh Report, 2008, pg 47.

competitive prices compared to gasoline without some form of subvention. Ethanol could be
14
competitive without subsidies if crude oil prices exceed US$ 60 per barrel . Currently, the
prices of crude oil have declined from more than $100/barrel to less than $40 dollars/barrel. This
has affected the process of diversion of sugarcane for ethanol production, which can also affect
the price of sugar in international markets.

Bagasse-based Co-generation

18. The principal fuel utilised by sugar mills to generate steam is bagasse (fibrous waste left over
after recovery of sugar juice). One tonne of sugarcane produces approximately 33 kg of
15
bagasse . As only 20-30% of bagasse is required to meet the steam and power requirements, the
16
remaining is wasted . The mills can therefore, consider utilising the bagasse left after meeting
their internal energy requirements, for co-generation purposes. This would also open up an
additional income stream for the mills. Sugar mill co-generation is advantageous as it would
entail low capital & near zero-fuel costs, use of indigenous ‘non-polluting’ fuel, improving
viability & fuel efficiency and minimal transmission & distribution costs. Indian sugar mills have
the potential of generating about 4000 MW power through co-generation. Technical & viability
estimates suggest that mills with capacity of at least 1200 TCD based on annual crushing season
of 180 days of cane can diversify into co-generation. A total of 47 mills with capacity of 723.86
MW power generation have been brought on the Power Purchase Agreement (PPA) list.
However, the growth potential is constrained because of (i) low up-take in co-operative mills
(constitute 56% of installed capacity in the country), (ii) high interest cost of capital from
banking and non-banking financial institutions and (iii) poor financial position of mills. Further,
low/ non-existent buyback rates acts as a dampener for mills in providing electricity to the grid.

Section IV Domestic Marketing and Trade Competitiveness of Sugar

19. Sugar falls within the purview of essential commodities and therefore, involves controlled
and monitored pricing. The Indian domestic sugar market is one of the largest markets in the
world in volume terms and therefore, the demand for the domestic and not the international
market drives sugar production in India. Being an essential commodity, the production and

marketing of sugar is regulated under the Essential Commodities Act. Thus, the release of
sugar for domestic market as well as export is governed by monthly release quotas of the mills.
17
While, during the liberalisation period, the share of levy sugar has consistently been
decreased, owing to the quotas, the mills are not yet able to sell/export their entire stock. As
a result, mills store sugar stocks for long period of time, which in turn adversely affects its
quality and thereby the price realised. The CACP, also recommended that the Government
should (i) review the functioning of release mechanism so as to bring transparency and
efficiency and (ii) allow the
market to determine sugar prices so as to ensure a good return to the industry as well as a
remunerative price to the farmers.

18
20. The trends in sugar exports also reveal a fluctuating share in agriculture exports (Table
9). The coefficient of variation reveals a variability of 78.4 per cent in the case of sugar exports
vis- à-vis exports of agriculture and allied products. This is primarily owing to the fact that
marketing of sugar continues to be highly regulated.
Table 9:
Trends in (Rs
Sugar .
Exports cro
re)
Particulars 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-
P
07
Sugar &
Mollases 505.1 1781.9 1814.5 1236 155.1 597.9
3184.7
Agri & Allied
Products 27288.2 28144 32473.3 34615.7 38078.1 45220.1
56628
Share of sugar in
agri exports (%) 1.9 6.3 5.6 3.6 0.4 1.3
5.6

Source: Handbook of Statistics on the Indian Economy, 2006-07, RBI, pg 210. P: Provisional

21. As indicated in the first paragraph, India is the only country in the world to
produce
‘plantation white’ sugar while other countries produce either raw or refined sugar or both.
Sugar processing units are not equipped for producing refined sugar (phospho flotation)
or for processing of raw sugar, and therefore import of raw sugar and processing the same
and ensuring operations of the unit throughout the year becomes infeasible. At present
mills can import raw

17 Refers to the quantity procured by the government at levy prices. Fixed at 10% of
the total sugar production of the mill since
2
0
0
2.
18 Exports of sugar and molasses during 2002-2005 were to the tune of Rs.1814 crore,
Rs.1236 crore, Rs.155 crore and Rs.384 crore - Report of the Working Group on
Agricultural Marketing Infrastructure and Policy Required for Internal and External
Trade for the XI Five Year Plan 2007-12, Agricultural Division, Planning Commission,
GoI, January 2007, pg. 215.

sugar at zero duty against advance licenses only if they reprocess it into white (refined) sugar
19
for exports within 24 months of the license being issued .

20
22. The study conducted by Dr. Bhalla also indicated that India did not have advantage
in sugarcane cultivation or sugar production at current domestic and international prices. Similar
views have also been expressed by the ‘Commission for Agricultural Costs and Prices’, as India
21
continues to be an ad hoc exporter of sugar . This was owing to the lack of alignment between
22
sugarcane and sugar prices . It leads to cane payment arrears and induces cyclicality,
which causes to destabilise the revenues of the sector. Over the last decade, on an average,
mills have
struggled to generate return on invested capital over and above their cost of capital, owing
23
to high mandated cane prices (constitute nearly 63% of the cost) and volatile sugar prices .

23. The Haryana study has indicated that during 2001, international price of sugar was just
62 per cent of cost of sugar production and thus made it uncompetitive in the international
market. (Haryana report, 2008, Pg.56). The study by IIM during 2001 also indicated that sugar
industry was not export competitive due to higher than the statutory minimum prices paid to
the farmers. As per the details available, exports, imports and export price of sugar have varied
substantially (Table 10) and in fact, in nominal terms, the export price/quintal has declined
between 2001 and
2005. As per the policy in vogue, importers can purchase duty free sugar if they sell the entire
quantity abroad after processing and are not permitted to sell the volume locally

24. The country’s export competitiveness is further affected owing to the inefficiency
in production of the sugar mills in terms of capacity utilisation, technology available and
maintenance. Most of the sugar mills that happen to be in the co-operative sector are
under utilised and almost reaching a state of junk (e.g: Sathion Co-operative Sugar Mill
in Uttar
Pradesh), thus leading to considerable increase in cost of sugar
production.

19 Business Line, 13 January 2009.

20 Globalisation and Indian Agriculture, ‘State of the Indian Farmer’, Vol.19, Ministry of
Agriculture, GoI.
21 Reports of The Commission for Agricultural Costs and Prices for the Crops
Sown during 2007-2008 Season, Department of Agriculture and Cooperation,
22Ministry of Agriculture, GoI, pg. 6.
23 Ibid. Analysis, 2007.
KPMG
 Table 10: Price of Sugar in International Market
orts Imports Export Price/Quintal
2000-01 431 31 1272
2001-02 1728 33 1187
2002-03 1769 33 1064
2003-04 1217 63 1013
2004-05@ 67 255 1098

Source: Karnataka Report, 2008, page 115.

@: Price of sugar in international market improved from an index of 100
in 2004, to 138 in 2005 and to 206 in 2006. However, it declined to 141
in 2007 but again improved to
189 in 2008. (RBI Bulletin, November 2008, pg. 1040)

25. However, Karnataka study (Pg. 81) has brought out that during 2006, one of the sugar
mills exported sugar and realized Rs.1810/ quintal as against domestic price realisation of
Rs.1,743/quintal. Similarly, XI Plan’s working group on “Agriculture, Marketing Infrastructure
and Policy required for Internal and External Trade” indicated that sugar price realization
during
2005-06 was better than 2002-03 as unit value was 17.58 during 2005-06 as against 11.51
during
2002-03. However, a caution has been added in the report that global prices of
agricultural products are highly volatile (Pg. 218).

26. With respect to sugar imports, it is proposed to ease out the ‘grain-to-grain’ norm, so that
the re-processed white sugar can be sold in the domestic market first. The re-export
obligation –
1MT of white sugar for every 1.05 MT of raw imported – can be met separately on a ‘tonne-
to- tonne’ basis. These could involve processing domestically sourced cane rather than the
originally imported raw. Further, deferment of existing white sugar re-export obligations
(against past advance licenses) has also been provided till end-December. Effectively, it
means mills will not be allowed to discharge their outstanding export obligations under the
advance license scheme, estimated now at around 7 lakh MT. The whole emphasis is on
conserving whatever sugar is
available, by liberalising imports and bottling up
24
exports .

27. But how viable are raw sugar imports? Currently, the March No. 11 contract at the
New
York Intercontinental Exchange is quoting at about 12 cents/pound or $265/tonne.
Adding

24 The government’s decision comes in the wake of domestic shortage and hardening
prices of sugar. With output for 2008-09 (October-September) variously estimated at 180-
190 MT, along with opening stocks of 80-100 MT and consumption of 230 MT, the current
season is expected to close with 30-60 MT, which will barely meet 2-3 months’ domestic
requirement. It is this shortage perception that has led to a firming of spot sugar prices by
about Rs.1,500/MT over the last one month alone. And, it is also driving the Government’s
proposed move to permit duty-free raw sugar imports on a ‘tonne-to-tonne’ basis till the
end of this season and restrict exports to the extent possible. Source: Business Line, 13
January 2009.

freight of $30/ tonne from Brazil would take the landed cost at Indian ports to roughly $295
(Rs.14,340/MT). If one also factors in the costs at the port (Rs.750-1,000, inclusive of bagging),
transport to factory (Rs.500-1,000 depending upon location) and conversion (Rs.1,500-
2,000 depending on whether in-house baggase or costlier coal is used as fuel), the effective
mill-gate price of the processed white sugar would be well above Rs.17,000/MT. This is less
than the Rs.17,900-18,000/ tonne ex-factory price in Maharashtra. But then, any large-
scale imports by India may drive up world prices as well, thereby changing the equation. As of
now, it looks as though imports would be viable only for coast-based factories and
refineries, especially those
catering to the deficit Kolkata and eastern region
25
markets .

28. Thus the issue of export competitiveness and import of raw sugar needs further
analysis for taking policy decisions.

Section V Policy Issues

29. Sugarcane constitutes an important commercial crop accounting for 4.83 million ha.
26
and production of 345.31 million tonnes during 2006-07 . India also happens to be one of the
largest producers and consumers of sugar. However, both sugarcane cultivation and sugar
production revealed unviability in their operations. Further, the analysis of ratios between
returns and cost of cultivation (representing paid-out cost only) of sugarcane between 2001-02
and 2007-08 showed substantial variability, as it was 1.35, 0.91, 1.15, 1.15, 1.39, 1.98 and 2.32
during the past seven
years. To enable growth and development of the sugar industry in the long-run, the following
proposals may be considered.
• Greater investment in research and development for improved seed varieties, adoption
of water management practices, improved farm practices including ratoon crop
management to improve productivity in terms of yield and sucrose content/recovery.
• Conflict between cane prices (SMP & SAP) need to be sorted out and a consensus needs
to be arrived at between the Centre and the States, such that the prices are remunerative for
the farmers but not restrictive for the millers. If necessary, the difference between the
SMP and
SAP can be subsidised by the Government.

25 Ibid.
26 Handbook of Statistics on the Indian Economy, 2006-07, RBI, pg 51-53.

• Regulations with respect to sugar exports need to made less stringent. Exports need to
be allowed in situation of sugar surplus and imports of raw sugar allowed in case of deficits
to help bridge the supply gap. However, the latter requires changes in technology to be
adopted by the sugar mills, as some of the mills in operation are not equipped to make
refined sugar.
• The monthly release mechanism needs to be removed and levy sugar (10%) should
th
be discontinued as 3/4 of total sugar production is consumed by industrial and business
27
segments and high income households . The processing of molasses and bagasse
can generate additional revenue of 17 per cent. This may, however, call for substantial
credit support for diversification of activities.
• At present, the sugar mills operate on an average for 148 days (Table 8). This
28
was happening because of an increase in number of units and capacities .
Deceleration and variability in area under sugarcane adversely affected the working period
of the sugar mills. Further, to enable minimum capacity utilisation by the mills, the
29
radial distance between sugar mills should be increased from 15 km to 25 km .
• Delayed prices by sugar mills and fall in crude prices are likely to reduce the acreage
under sugarcane. During 2008-09, area under sugarcane has declined by 17 per cent.
Further, no significant increase in sugarcane prices for past couple of years has adversely
affected area under the crop. The issue is getting compounded owing to fall in crude prices.
 The latter has discouraged use of sugarcane for bio-fuels.
30
• Cyclicality management practices may be put in place. This will provide opportunities
to
minimise arrears and reducing need for governmental support. Government/s can
create strategic stocks of sugar. Not only will it aid in maintaining a buffer, it would also
help in reducing glut. This would also enable in addressing the variability in sugar prices
and better
price recovery

27 KPMG
Analysis, 2007.
28 Installed capacity of sugar mills at all-India level increased at compound annual growth
rate of 3.3% between 2000 and 2005, whereas the capacity utilisation declined from 112%
in 2000 to 105% in 2002 and increased to 115% in 2003 but declined substantially to 72%
and 67 % in 2004 and 2005, respectively, - Report of the Working Group on Agricultural
Marketing Infrastructure and Policy Required for Internal and External Trade for the
XI Five Year Plan 2007-12, Agricultural Division,
Planning Commission, GoI,
January 2007, pg. 30.
29 Reports of The Commission for Agricultural Costs and Prices for the Crops Sown
during 2007-2008 Season, Department of
Agriculture and Cooperation, Ministry of
Agriculture,
30 CyclicalityGoI, pg. 10.
management refers to cane and
sugar price alignment.
 Conclusion

30. Of prime importance, however, is improving cane productivity and sugar recovery.
In absence of improvement in farm practices, sugarcane cultivation may have horizontal
growth at the expense of other crops. We therefore, need to work towards a developmental
model that would enable a positive effect on the various stakeholders, be it the cultivators,
the millers, the
consumers or the policy makers
31
(diagram) .
RECOMMENDATION

31. To address the issues discussed above, adequate financial and credit support would
be mandated. The sugar industry would require overhauling, in terms of upgrading
technology, putting in place cyclicality management practices32, marketing, etc., and would
require access to cheap funds. This is truer in the case of co-operative mills. Private mills have
better access to cheaper source of funds (from the market), viz., IPO/ECB/Right Issue, etc.,
unlike the co- operative mills. This would therefore, require necessary amendments by the
Government in the Co-operative Act to enable co-operative mills to be eligible for and
have access to cheaper
investible funds in the
market.
References:

80
(1) Mr. Rakesh Kumar, Sugar Sales Office, Triveni Engineering Ltd.
(2) www.trivaniengineeringltd.com
(3) www.havells.com
(4) www.uttemsugermeel.com

81