The Hindu Business Line : Sweet rush: Sugar industry turns bullish

ONLY a couple of years ago, the worst thing for an industrialist to own was a sugar plant. With ex-factory sugar prices at Rs 10 to Rs 11 per kg and molasses selling at Rs 600 per tonne, the joke doing the rounds then was that for every sugar share, you could get your revolver loaded for free!

But with sugar realisations now in the Rs 17-per kg range and molasses, too, fetching Rs 3,500-Rs 4,000 per tonne, the sector has suddenly turned hot.

Companies such as the Siddharth Shriram-controlled Siel Ltd and Mr Sandeep Jajodia's Monnet Sugar, which, not so long ago, were contemplating sale of their mills, are today talking about expanding capacities and even setting up new greenfield projects.

According to official information, during the last one year, there have been 147 Industrial Entrepreneurs' Memorandum (IEM) filed with the Department of Industrial Policy and Promotion (DIPP) for establishing new sugar plants or expanding existing ones in Uttar Pradesh alone.

Many of these have come from the likes of Bajaj Hindusthan Ltd (which alone has filed around 30 IEMs), Balrampur Chini, Triveni Engineering & Industries, Mawana Sugars (earlier part of Siel Ltd), DCM Shriram Consolidated, K.K. Birla Group and Dwarikesh Sugar Industries.

First-timers' interest

The list does not, however, end there. Besides these established players in the industry, there are a host of first-timers, too, wanting their share of the sweet rush.

Prominent among them are Parle Biscuits Pvt Ltd and Mirza Tanners Ltd.

Mr Vijay Chauhan's Parle Biscuits has filed as many as 14 IEMs, while Mr Rashid Mirza's Rs 190-crore leather footwear company intends to set up four sugar plants at various locations in the State.

Then, there are some less known names such as Univenta Agricultural Pvt Ltd, Hind Industrial Resources Ltd, Ojas Sugars and DK Chemicals.

"All these are only expressions of intent and not many would translate into actual investment. But they nevertheless reflect the new-found bullishness in the industry, which was totally absent when the country's sugar output peaked at 201.45 lakh tonnes in the 2002-03 season (October-September)," officials pointed out.

Since then, production has dipped to 140 lakh tonnes in 2003-04 and an estimated 120 lakh tonnes this season, boosting price sentiments and triggering renewed interest in the sector.

The biggest gainers from this, market observers say, are those companies that saw the upturn coming and began investing in new capacities in anticipation of better days ahead.

Bajaj Hindusthan, for instance, announced plans of setting up four new plants of 7,000 tonnes daily cane capacity (tcd) each in early-2004, when the party had barely started.

Out of these, it has already commissioned the first plant at Kinnouni (Meerut) and expects the other three units at Bilai (Bijnor), Thanabhawan and Bhaisana (Muzaffarnagar) to go on stream from the 2005-06 crushing season.

Others whose plants are `realistically' slated to be commissioned during the coming season include Balrampur Chini's 7,000 tcd unit at Akbarpur (Ambedkarnagar), Mawana Sugars' 5,000 tcd unit at Maukhas (Meerut) and Dwarikesh Sugar's 5,000 tcd unit at Afzalgarh (Bijnor).

The K.K. Birla Group, too, is in the process of setting up a 7,500-tcd plant at Hata (Gorakhpur) and expanding the capacity of its 7,500-tcd plant at Hargaon (Sitapur) under Oudh Sugar Mills Ltd to 10,000 tcd.

"Both will come up in 2005-06 season," claimed Mr C.B. Patodia, Advisor, Birla Group of Sugar Industries.

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