Since the latter half of the last financial year the sugar industry has seen a healthyupswing globally. Sugar prices for the first time has crossed US 20 cents to a pound sinceOctober 2012. This is a long way forward from 15 cents to a pound witnessed at thebeginning of the year. There has been a contraction in global production of sugar and aweak harvest in Brazil. In contrast there has been a definitive rise in consumption ofsugar in India and China. Based on this the price surge is expected to remain till nextyear. In this backdrop where till now the global sugar industry was in a very slackcondition in the past three to four years is now looking forward to an improvedrealisation in the immediate future. It is our firm belief based on the healthy rise ofglobal prices the sugar industry would witness a revival that in a very positive mannerwould create opportunities for the domestic sugar industry as well.
Back home in the domestic market the sugar industry has also witnessed a veryencouraging environment with improvement in cash flow. Being the second largest agro-basedindustry in India and over 500 million people dependent directly or indirectly theimprovement in its health would have very positive collateral benefits for the Indianeconomy as a whole.
The domestic sugar industry's production and sales volumes (including exports) duringsugar year 2015-16 i.e. October 2015 to September 2016 is likely to be around 25 millionMT and 27 million MT respectively leading to inventory reduction of about 2 million MT.This demand supply gap would help reduce the surplus carry-over sugar inventory which inturn will help sustain the improved realisations from sugar sales.
With a healthy and more stable foundation of the twin benefits of higher recoveries andbetter realisations the industry to address the three main focus areas. First would be toreduce the industry debt estimated to be over Rs. 51000 crore accumulated in the lastfive years. As per industry body
ISMA it is expected that the sugar industry may reduce its debt byRs. 10000 to 15000crore over the next twelve months. Second the role of our sugarcane farmers in sustainingthe health of the industry is an imperative necessity. Given the optimistic environmentwherein 92 percent dues till June 2016 have already been paid to the sugarcane farmers bythe mills. As a result sugarcane arrears have nosedived from Rs. 21800 crore last yearto Rs. 4230 crore at present (till June 2016). Third there has been a dire need forplant modernisation in many mills the added topline would help boost meet the capitalexpenditure requirement to address this priority need.
The export incentives provided last year saw a spurt in sugar exports. However withdomestic prices increasing fast there was a sluggish interest for exports and a furtherexport duty imposed recently has made exports almost non-viable. Analysts believe thereshould not be any remarkable change in domestic prices of sugar and though governmentestimates a fall in sugar production for 2016-17 there would be enough inventories due tocarry-over stock that would prevent any unforeseen spike in domestic sugar prices.
Maintaining profitability of the sugar industry is extremely essential for survival ofmore than 50 million farmers and their families across all states of the country andaround 2 million employees/workers and their families directly or indirectly dependent onthe sugar industry. Profitability of the sugar industry is equally important to repay thebank loans without which payment to lenders and also others dependent on sugar industrywill be impacted.
At this juncture as a leader in the sugar industry we would also wish to highlightthe importance of a complete implementation of the Rangarajan Committee proposals whichthe government needs to execute. The industry has welcomed them earlier and given thefavourable situation today this could be an opportunity to bring in the much-neededreforms. We would continue to support and push for any positive policies aimed for theoverall industry and reforms that are best suited when the financial viability isimproving especially in the short to medium term.
Your Company with its dedicated family of employees has consistently focussed onexcellent corporate practices. As a market leader we continue to share the sameresponsibilities in playing an important role in India's growth story. A reflection of ourfirm intent is expressed through the Company's increase in production and sales of sugarin the period 2015-16. During the year ended March 31 2016 your Company crushed 10.922MMT of sugarcane. The average recovery of sugar from sugarcane was higher at 10.32 percentas against 9.38 percent in the previous year. During this period your Company produced1136070 MT of sugar and 533219 MT of molasses. Further the Company sold 1296466 MTof sugar and 117968 MT of molasses as against 1239186 MT of sugar and 33684 MT ofmolasses during the previous year.
A s always your support has been overwhelming in seeing us through the downturn in therecent past. We believe the present upsurge in the sugar industry would enable us to focuson improving production and better financial management that would supplement us inmaintaining our leadership role as an important player in the sugar industry in India.
Chairman & Managing Director