The Hindu Business Line : Crash in molasses, bagasse prices adds to mills' woes

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New Delhi Jan. 29 If falling sugar realisations were not bad enough news for mills, compounding their woes has been the still sharper dip in prices of by-products - molasses and bagasse.

In Maharashtra, ex-factory rates of molasses are currently around Rs 1,100 a tonne, while ruling at Rs 400 a tonne for bagasse. Average prices of both by-products during January this year are over 40 per cent lower over their corresponding levels of last year.

No different elsewhere

The situation is no different in other States. In Tamil Nadu, factories are disposing of bagasse at Rs 450-500 a tonne, with some cooperative mills having no buyers in their vicinity selling for as low as Rs 300-350 a tonne.

Molasses

It is even worse for molasses, with realisations now at Rs 300 per tonne. "Further, we pay a central excise of Rs 750 a tonne, apart from a 30 per cent sales tax levied on the ex-factory price plus excise. That translates into a total duty incidence of over 350 per cent!" said Mr N. Ramanathan, Director (Finance), Ponni Sugars (Erode) Ltd.

Bagasse

In Uttar Pradesh, the mills are getting Rs 650-700 a tonne from bagasse, though realisations are higher for molasses: Rs 2,100 a tonne on "controlled" sales to country liquor manufacturers and Rs 2,600 on "free" (price- decontrolled) molasses that are sold to the Indian made foreign liquor (IMFL) and alcohol-based chemical segments.

"Molasses rates are higher in UP because, unlike in Tamil Nadu, there is no dearth of distillery capacity here," said Dr G.S.C. Rao, Executive Director, Simbhaoli Sugars Ltd.

For every 100 tonnes of cane that factories crush, they typically generate 10 tonnes of sugar, 4.5 tonnes of molasses and 30 tonnes of bagasse. Of the 30 tonnes, about 24 tonnes is burnt to produce steam for the mills' own captive consumption. That still leaves six tonnes of surplus bagasse that the mills have to sell, mostly to the paper and pulp industry.

Best placed

The companies best placed to insulate themselves from falling molasses and bagasse prices are those that have set up sufficient ethanol and power co-generation facilities.

"We now have a saleable co-generation capacity of 75 mega-watts. So, we will not be selling a single tonne of bagasse", Mr Vivek Saraogi, Managing Director of Balrampur Chini Mills Ltd, told Business Line.