Even estimates of excessive sugar availability following a bumper cane output next season is unlikely to deter sugar companies from setting up greenfield refineries near ports.
Four major sugar producers – Balrampur Chini, Shree Renuka Sugars, EID Parry and Simbhaoli Sugars – had proposed an accumulative investment of about Rs 1,000 crore to set up a massive refining capacity of 6,500 tonnes per day (tpd) across several Indian ports.
The main purpose of the port-based refineries was to import raw sugar into the country and export the same on “quantity-to-quantity” or “grain-to-grain” (export equivalent to import in tonnage term) basis. This practice, according to existing norms, will attract no import duty on refined sugar, said a top industry official.
At present, raw sugar imports in India do not attract duty because of the scarcity of the sweetener during the previous two seasons. Following the revised output estimate to 18.8 million tonnes from nearly 15 million tonnes and an even better forecast for the next season, Agriculture Minister Sharad Pawar hinted at an import levy in October.
Industry trade body Indian Sugar Mills Association (ISMA) has estimated next year’s output at 25 million tonnes — more than India’s total consumption of 24 million tonnes. With a carry over stock of about 6 million tonnes, the country may not require imported raw sugar to meet domestic demand next season.
Still, we will continue to run the refinery as per capacity, said Sanjay Tapriya, director, Finance of Simbhaoli Sugars.
Delhi-based sugar producer Simbhaoli Sugars is in the process of setting up a 1,000 tonnes per day (tpd) refinery facility at Gandhidham, barely 2 km from Kandla port in Gujarat. It plans to invest Rs 180 crore on the plant. The company currently has most of its cane crushing, distillery and co-generation facilities in Uttar Pradesh.
Justifying the need for such refineries near international harbourss, Tapriya said: “We are planning to maintain the cycle of the sugar season when the supply constrains emerge after every three years. In case, supply remains smooth in India, we will focus on exports in deficit countries such as Sri Lanka, Pakistan and the West Asia. But, when demand surpasses the supply we will divert our output to domestic market.”
Kolkata-based Balrampur Chini has proposed to install balancing equipment on its 500 tpd of refining facility at Hydergarh, Uttar Pradesh, which is expected to have an investment of Rs 5-6 crore.
“The plant already exist, therefore, no major investment is required. We are planning to install some imported equipment which will fetch up an additional refining capacity of 500 tpd in UP,” said Kishore Shah, chief financial officer of Balrampur Chini.
The Middle East requires huge quantity of sugar for its domestic consumption. India will have geographical advantage to supply sugar from western ports if the country’s internal supply remains smooth.
Another sugar and ethanol producer, Shree Renuka Sugars plans to set up a 3,000 tpd refinery near Kandla port to process raw sugar imported from its newly acquired Brazilian companies Equipav SA Acucar e Alcool and Vale Do Ivai S.A. Acucar E Alcool. The refinery with an investment of Rs 400 crore is set to commence commercial production in December 2010.
Murugappa Group’s flagship company EID Parry has also formed a joint venture with Cargill International SA to set up a port-based standalone sugar refinery in Kakinada, Andhra Pradesh, at an estimated investment of Rs 325 crore ($72 million).
With an initial capacity of 600,000 tonnes per annum, expandable to 10,00,000 tonnes, the refinery would be the largest in the south-Asian region. In the joint venture, EID Parry will hold 51 per cent, while the remaining 49 per cent of equity will be held by Cargill International.
