'Downstream foray can help mitigate risks'

India's sugar industry should reduce its overdependence on the commodity for its earnings and instead look at diversifying into downstream products to mitigate risk, according to Prakash Naiknavare, managing director, Maharashtra State Cooperative Sugar Factories Federation.

"The Indian sugar industry, especially the cooperative sector in Maharashtra, has to look beyond sugar if it has to survive during years of excess production," Naiknavare said. India's sugar output in the season ending September is estimated to touch 26-27 million tonnes compared with 19.3 million tonnes produced a year ago.

Faced with a huge stockpile amid sluggish prices, the industry is heading towards difficult times as the output in 2007-08 (October-September) is also expected to set another record. Currently, the Maharashtra sugar industry is incurring a loss of Rs 3,500-4,000 per 100 kg sugar on an average, Naiknavare said. The cost of production per 100 kg is Rs 14,500-15,000, while the price is Rs 11,000.

"For the financial year ended March, some of the leading sugar companies have reported a net loss in sugar business while they have made profits in distillery and co-generation business," Naiknavare said. The industry, according to Naiknavare, should also get into the production of 45 ICUMSA variety sugar to expand its geography of exports.

India mainly produces refined white sugar of 100-159 ICUMSA, also known as white plantation sugar. "This variety of sugar has a huge market in India and only a limited market of 2.5-3 million tonnes overseas," Naiknavare said.

Raw sugar production will open up huge prospects in the export market. "At any given point, about 50 million tonnes of excess sugar is traded globally. Of this two-thirds is raw and one-third is white," Naiknavare said.

The industry, especially Maharashtra's cooperative sector, has been complacent on account of huge domestic market, and it never focused on shifting to producing other varieties of sugar as well as downstream products.

"Maharashtra has to take a key role in this as it is the country's leading sugar producer," he said. The state sugar federation is likely to put forward a proposal seeking the government's approval to set up a sugar refinery close to the Mumbai port.

According to him, the industry will willingly get into value addition if the Centre makes blending of ethanol with automobile fuels compulsory. "In Brazil, primary crushing of sugarcane is for sugar and secondary crushing for ethanol," Naiknavare said.