With the sugarcane production in southern India
being hit this year on account of a deficient rainfall during the south-west monsoon
season, the Murugappa Group
company EID Parry
is taking measures to sustain its business.
Among the measures undertaken by the firm are initiatives in cooperative farming, resource supply for drip and micro irrigation along with partnerships ensuring a steady supply of raw material to the firm.
Currently, more than 90 per cent of the company's revenue accrues from its sugar business.
The availability of sugarcane and sugar prices would play a major role in determining the profitability of the company.
As part of its partnership deal with farmers, EID would be offering seeds as well as technological support to the latter, besides conducting training programmes that would help them improve yield, reduce costs and increase their income.
Last year too, crushing operations took a major hit after several parts of southern India, including Tamil Nadu, Karnataka
and Andhra Pradesh, suffered from drought conditions. Sugar production had consequently lowered to 4.33 lakh metric tonnes (LMT) this year.
The non-availability of irrigation water from the Cauvery river worsened the situation further. During the year 2016-17, the Tamil Nadu
Plants crushed 24.62 lmt of sugarcane, as against 23.46 lmt in the year-ago period. The average recovery of the state stood at 8.89 per cent, as against 9.14 per cent last year.
The situation in Andhra Pradesh
was no different. In Karnataka, the company crushed less cane than the previous year, resulting in a lower yield, because of a poor monsoon, coupled with the diversion of cane that was carried out by farmers
who were fearful of crop damage. The average recovery stood at 10.75 per cent in Karnataka, as against 11.53 per cent last year. In Andhra Pradesh
it stood at 9.67 per cent, as against 9.37 per cent in the previous year.
The average realisation of sugar was up from Rs 24.80 per Kg in 2015-16 to Rs 34.30 per Kg in 2016-17. The higher sugar prices along with a renewed focus on product differentiation and manufacturing excellence programmes resulted in improved profitability of this segment, stated the company in its 2016-17 annual report.
"While the link between the revenue and the sugarcane price has been made possible during the 2016-17 sugar season due to improved sugar prices, it is important and in the interest of both the farmers
and mills that this umbilical link between the revenue and the sugarcane price is established and maintained, going forward. The Central government must continue the policy of a price stabilisation fund, which was in place with cess being collected on sale of sugar from February 1, 2016".
This will ensure that the farmer gets a minimum price protection by way of an FRP payment along with a revenue sharing formula during price hikes and regular contributions made from the price stabilisation fund. This is the only way in which cane price arrears can be avoided in a cyclical industry like sugar, especially during a downtrend, it argued.