The initial euphoria over sugar and ethanol-based investments in Bihar has disappeared. Hardly 10 per cent of the Rs 24,000 crore investment proposals that came between 2006 and 2007 saw the light of day, as the sugar cycle continued to be highly cyclical and the ethanol blending programme remained a non-starter. Companies such as Rajshree Sugars, Dhampur Sugars and India Glycols chose not to go ahead with the investments proposed in 2006-07.
Most of these investments were proposed in early 2006, when the sugar industry was going through a boom. However, the sugar season beginning October 2006 saw an all-time high output, causing a crash in sugar prices and affecting the profitability of the industry. Sitting on surplus stocks, the sugar industry failed to make sugarcane payments to farmers. The government had to bail out the industry by providing interest-free loans, creating additional buffer stock and providing export assistance. “Initially, the reason for companies not proceeding with projects was financial ill-health. Though industry prospects brightened last year, the industry realised there was no need for additional capacity creation,” said an executive of a New Delhi-based company that had planned to invest Rs 550 crore in setting up a 10,000-tonne daily cane crushing mill in the state.
The much-talked-about ethanol blending programme has also failed to take off the way it was expected. Launched in 2006, the programme for blending petrol with five per cent ethanol saw several hiccups. A number of state governments imposed taxes on ethanol’s entry and exit, while a number of standalone producers defaulted on supplies due to better alcohol prices.
The state government’s plan to auction 15 sick mills belonging to the Bihar State Sugar Corporation was a limited success. Initiated in 2006, the government has so far been able to find suitors for only six of the 15 mills. Public sector oil marketing companies bought two such sick mills and invested Rs 600 crore in reviving these.
Both the mills are expected to be operational around December. Reliance Industries, which bought one such mill, has not made any investment. Noted filmmaker Prakash Jha is setting up a sugar mill in the state at an investment of Rs 250 crore. Some investments have been made in expanding existing mills.
An official of the state sugarcane department said the state would see more investments once the new government was elected.