U.P. SUGAR MILLS ASSOCIATION Cane Development & Sugar Industry : Contemporary Challenges and Alternatives 30-APRIL-2015
Average Milling capacity at different countries… Avg. milling capacity(tcd) 14500 11000 9500 9000 7500 6000 4000 4000 3900 3400 US cane Australia EU Brazil (C/S) South Africa Colombia India China cane Russia Indonesia 1
Sugarcane Value Chain ………. Sugarcane 1000 kg Sugar Bagasse Molasses Press Mud 100kg 300kg 45 kg 30kg Steam Alcohol Bio-fertilizer 660kg 10.5 lit 30kg Power 130 kwH Exportable Surplus 100 kwH 2
Ethanol : tool to balance sugar production Adequate alcohol availability to meet consumption requirement of all 3 sectors. Therefore, present annual alcohol requirement is just about 2.3 billion litres against production of 2.6 billion litres Energy content of upto 10% ethanol blended petrol equivalent to pure petrol, and benefits of ethanol justify a premium Buyer of ethanol enjoys monopoly position At 5% blending, USD 900 million of foreign exchange saved annually 3
Bagasse based cogeneration of power At current installed crushing capacity, potential to generate power is said to be 7500 MW Only 210mills generating exportable power Currently, 3200 MW of power is exported by sugar mills to the grid Rates offered by State Government agencies in the range of INR 3.12 - INR 5.14 per unit Some units are trading power at INR 4.5 per unit too 4
SMP/FRP for sugarcane has been increased by Central Govt. Cane Price SMP/FRP (Rs./ton cane) 2,200 2,100 2,000 1,700 1,450 1,391 1,500 1,298 1,000 857 857 848 839 833 500 - 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 5
SAP fixed by 5 States 330 305 295 300 285 295 285 280 280 280 270 280 280 250 271 265 265 240 240 240 210 225 235 210 210 226 220 205 210 190 200 180 190 170 150 145 139.12 120 2010-11 2011-12 2012-13 2013-14 2014-15 FRP U.P. Uttarakhand Punjab Haryana Tamil Nadu 6
Indian Production and Consumption 7
Carry forward sugar stocks increasing every year 8
Average domestic sugar prices have been falling 35,000 Sugar Price (Rs./ton sugar) 29,510 31,480 29510 30,000 29,170 26,000 27,270 25,000 22,000 20,215 20,000 15,769 14,195 15,000 12,051 12,462 10,000 5,000 - 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Current 9
Average global sugar prices in last few months 10
Cane price arrears as on 31 st March …… 11
What is the way forward? • Cane pricing policy • Revenue realisation of sugar mills • Encourage ethanol production • Improve revenue from by-products 12
Encourage ethanol production • Several major benefits: – Fuel ethanol reduces pollution – It gives higher revenue realisation to sugar mills – Better remuneration to farmers – Substitutes petrol, which can then be exported, earning foreign exchange for the country • Central Government has initiated steps to encourage ethanol: – Fixed pricing policy – Price linked to cane FRP, even when crude price falling • State Governments need to encourage ethanol too: – Remove Taxes/duties on fuel ethanol – Allow freer movement of ethanol – Give annual excise permits, both for intra and inter-State 13
Ethanol production State-wise production capacities: State No. of Capacity State No. of Capacity (in crore litres (in crore litres mills mills per annum) per annum Uttar 28 65.76 Maharashtra 50 60.60 Pradesh Karnataka 17 31.20 Tamil Nadu 8 9.60 Andhra/ 14 14.85 Gujarat 8 7.86 Telengana Bihar 5 7.42 Punjab 1 1.2 Haryana/ 2 1.65 TOTAL 133 200.14 Uttarakahnd Additionally, there are 24 stand-alone distilleries with capacity of 23.73 crore litres per annum Total ethanol production capacity in India is 223.87 crore litres p.a. 14
Cogeneration of power • Indian sugar industry has potential to export 7500 MW power – Current installed capacity of 4200 MW – 255 mills have cogeneration facilities • State-wise installed capacity is as follows State No. of Capacity State No. of Capacity (in (in MWh) mills mills MWh) Uttar Pradesh 60 1050 Maharashtra 66 1000 Karnataka 54 1000 Tamil Nadu 30 563 Andhra 21 259 Gujarat - - /Telengana Bihar 7 89 Punjab 8 154 Others 10 108 TOTAL 255 4223 15
Still some challenges to overcome… • Cost of transporting ethanol over longer distances • Excise permits for inter-State movement • Taxes & duties on ethanol 16
Taxes & duties on by States State Govt. Export duty Import duty VAT Others U.P. 1.00 - 0.95 Maharashtra 1.50 1.50 5% Municipal & octroi Karnataka 5.5% Delhi 2.00 Gujarat 3.00 Kerala 0.56 M.P. 1.00 Punjab 2.00 Rajasthan 1.00 Uttarakhand 1.10 Tamil Nadu 8% Admn Ch 0.50 A.P. 5.5% 17
Supplementing ethanol availability • At 10% blending, requirement is 230 crore litres of ethanol – Current contracts for only 81 crore litres – Supply-demand gap of 150 crore litres • B-heavy molasses can give 580 crore litres of alcohol, instead of 270 crore litres currently made out of C-heavy molasses – Addl availability of 310 crore litres, sufficient for even 15% blending • But mills will need around Rs.7 per litre of compensation to divert the B-heavy molasses into ethanol 18
Govt. incentives required • Either Government gives subsidy of Rs.7 per litre of ethanol – Or remove central excise duty of 12.5%, giving Rs.5 per litre benefit – Cenvat allowed on molasses, so excise on molasses for ethanol will need to be removed • For 150 crore litres, subsidy will be Rs.1000 crore • Benefit to the country much larger – Earn foreign exchange of Rs.7000 crore through (saved) petrol exports – Green, renewable fuel: pollution control – Farmers & domestic industry benefit: Make in India 19
Graphical presentation of sugar production of top 4 States 20
Cost of production vs. Average ex-mill prices Rs./quintal 21
Cost of Prodeuction vs. ex-mill price of sugar 3300 Cost of Production Rs. 3270/qtl. 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 Private Coop. 22
Low rates for exported power to grid Karnataka: Rs.4.83 per unit Maharashtra: Rs.6.07 to 6.27 per unit* U.P .: Rs.4.68 to 5.67 per unit* Tamil Nadu: Rs.3.67 to 4.15 per unit* 23
Competitiveness of Sugar Industry Main reason for an uncompetitive sugar industry is High cost of production of sugar Which is in turn only because of an unrealistically high cane price Sugar mills in India pay the highest cane price in the world Urgent need to rationalise the cane pricing policy Link the cane price to revenue realisation Adopted in Maharastra & Karnataka Followed world over Use ethanol blending programme to balance surplus 24
THANK YOU ! 25
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