KM Sugar Mills Ltd Management Discussions

SWOT Analysis:

KM Sugar Mills consists of manufacturing and trading facilities of sugar and ethanol. Each of its business segments has its own strengths and weaknesses and exposures to a variety of opportunities and threats. The Company has the following SWOT attributes broadly:

Strengths

Managing Regulations and Business Environment

Good Margins

End Use Consumption

Diverse Product Portfolio of Sugar Industry

Weakness

Implementation of Advance Processes Technology

Appropriate Methods for control of cane diseases

Opportunities

Developments in Artificial Intelligence

Lucrative Opportunities in International Markets

Threats

Culture of sticky prices in the industry

Policy intervention by government being regulated industry

Increasing Sugar Cane Prices

K M SUGAR MILLS LTD SEGMENT WISE PERFORMANCE.

Particulars	Sugar	Distillery	Unallocable	Total
Revenue
Gross sales	61,296.03	7,592.70	-	68,888.73
	(54,349.14)	(5,391.36)	(-)	(59,740.50)
Less: Inter segment sales	3,172.80	-	-	3,172.80
	(2,187.95)	(-)	(-)	(2,187.95)
External sales	58,123.23	7,592.70	-	65,715.93
	(52,161.19)	(5,391.36)	(-)	(57,552.55)
Add: Other income	790.98	58.07	-	849.05
	(954.36)	(182.13)	(-)	(1,136.49)
Total revenue	58,914.21	7,650.77	-	66,564.98
	(53,115.55)	(5,573.49)	(-)	(58,689.04)
Segment results	4,824.63	740.72	-	5,565.35
	(4,337.01)	(181.33)	(-)	(4,518.34)
Less: Finance cost	1,631.25	23.03	-	1,654.28
	(1,366.61)	(18.55)	(-)	(1,385.16)
Profit before tax	3,193.38	717.69	-	3,911.07
	(2,970.40)	(162.78)	(-)	(3,133.18)
Current tax				1,047.64
				(722.15)
Deferred tax				54.29
				(89.65)
Profit after tax				2,809.14
				(2,321.38)
Other information
Segment assets	70,430.74	7,491.85	-	77,922.59
	(63,532.74)	(6,799.99)	(-)	(70,332.73)
Segment liabilities	45,292.52	1,526.89	782.01	47,601.42
	(40,638.09)	(1,434.94)	(733.29)	(42,806.32)
Capital Expenditure	1,889.12	694.59	-	2,583.71
	(7,065.53)	(527.24)	(-)	(7,592.77)
Depreciation and amortisation	1,708.17	550.91	-	2,259.08
	(1,120.66)	(466.68)	(-)	(1,587.34)

Inter-segment revenues are eliminated upon consolidation and reflected in the inter-segment sales column. Current taxes and deferred taxes are not allocated to individual segments as the same are dealt with at company level. The transactions between segments are primarily for materials which are transferred at market determined prices. Common costs are apportioned on a reasonable basis.

RISKS AND CONCERNS.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other risks, such as regulatory risk and commodity price risk.

(i) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companys exposure to the risk of changes in market interest rates relates primarily to the Companys borrowings obligations with floating interest rates. To mitigate the interest rate risks, the Company has established a periodical review procedure and ensures long term relations with the lenders to raise adequate funds at competitive rates.

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. This foreign currency risk is covered by using foreign exchange forward contracts and currency swap contracts. The Company does not have substantial transactions during the year in foreign currency so the Company does not have such kind of risk.

Foreign currency risk	In USD	Rs. in lakhs
Outstanding Balance from customers	NIL	NIL

As the amount of foreign exchange fluctuation is not material during past period so the Company has not hedged the foreign currency.

(iii) Regulatory risk

Sugar industry is regulated both by central government as well as state government. Central and state governments policies and regulations affect the Sugar industry and the Companys operations and profitability. Distillery business is also dependent on the Government policy.

(iv) Commodity price risk

Sugar industry being cyclical in nature, realizations get adversely affected during downturn. Higher cane price or higher production than the demand ultimately affects profitability. The Company has mitigated this risk by well integrated business model by diversifying into co-generation and distillation, thereby utilizing the by-products.

Credit risk

Credit risk is the risk that counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Companys sugar sales are mostly on cash. Power and ethanol are sold to state government entities; thereby the credit default risk is significantly mitigated. The Central Govt. has fixed the minimum sale price of sugar w.e.f. 14.02.2019 at Rs.3,100 per Qtl. which has mitigated the price risk to the some extent, however it needs to revised upward now Similarly, ethanol is sold to the Govt. undertakings/Oil manufacturing companies and power is sold to the Govt. undertaking at fixed prices as per Govt. orders / regulatory guidelines.

The impairment for financial assets is based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companys past history, existing market conditions as well as forward looking estimates at the end of each balance sheet date. Financial assets are written o when there is no reasonable expectation of recovery, however, the Company continues to attempt to recover the receivables. Where recoveries are made, these are recognized in the Statement of Profit and Loss.

Risk Management

For the purpose of the Companys capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Companys capital management is to maximize the shareholders value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Companys policy is to keep the gearing ratio under control except for the first quarter of the financial year due to non-payment of cane dues. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and short-term deposits.

In order to achieve this overall objective, the Companys capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that de ne capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing during the current period.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY.

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

Companys approach to talent development is founded on the belief that learning initiatives must remain synergistic and aligned to business outcomes, emphasise experiential learning, provide an enabling and supportive environment and promote learning agility. Deep functional expertise is fostered through immersion in solving complex customer problems by the application of domain expertise early in managerial careers. Key talent is provided critical experiences in high impact roles and mentored by senior managers. Managers are assessed on your Companys behavioural competency framework and provided with learning and development support to address any areas identified for improvement. As part of your Companys managerial development and capability building strategy, various programmes have been designed and customised to your Companys requirements under these platforms. Your Company has further strengthened its performance management system and its culture of accountability through renewed emphasis on Management by objectives which includes clearly defined goals and outcomes based assessment.

Particulars	Numerator	Denominator	31st March, 2024	31st March, 2023	Change
Current Ratio	Current assets	Current liabilities	1.02	1.04	-1.92%
Debt-Equity Ratio	Total Debt (Note 1)	Total Equity	0.96	0.97	-1.03%
Debt Service Coverage Ratio	Earnings available for debt service	Debt Service (Note 2)	1.58	1.92	-17.71%
Return on Equity Ratio	Profit for the year	Average Total Equity	9.71	8.80	10.34%
Inventory turnover ratio	Revenue from Operations	Average Inventory	1.85	1.62	14.20%
Trade Receivables turnover ratio	Revenue from Operations	Average Trade Receivable	37.16	54.93	-32.35%*
Trade payables	Purchases and Other	Average Trade	3.86	3.25	18.77%
turnover ratio	Services	Payables
Net capital turnover ratio	Revenue from Operations	Working Capital	69.39	35.46	95.69%^
Net profit ratio	Profit for the year	Revenue from Operations	4.27%	4.03%	24bps
Return on Capital employed	EBIT (Note 3)	Capital Employed (Note 4)	15.76%	12.85%	291bps
Return on investment	Profit for the year	Average Total Assets	3.79%	3.45%	34bps

* Delayed realisation of trade receivable

^ Increase in current liability of cane price increase for season 2023-24 Note 1: Debt includes lease liabilities Note 2: Debt service = Interest and Lease payments and Principal Repayments Note 3: EBIT = Profit before exceptional items + Finance Costs Note 4: Capital Employed = Tangible Net Worth + Total Debt + Deferred Tax Liabilities

Global Sugar Market Outlook

The global sugar market size attained a consumption volume of about 180.31 million tons in 2023. The market is projected to grow at a CAGR of 1% between 2024 and 2032, reaching a volume of 197.19 million tons by 2032.

Key Takeaways

Sugarcane is the worlds largest source of sugar, producing about 80% of the global supply.

Major producers of sugar include Brazil, India, China, Thailand, and the United States.

There is a growing focus on integrating ethical and sustainable practices into the manufacturing process due to rising social and environmental concerns.

Sugar is a sweet, crystalline food supplement mainly extracted from sugar beet and sugar cane and is used in various kinds of drinks and food. Sugar is sweet, soluble in water, provides nutrition and energy, and enhances the colour and texture of food. It can also be used to extend the shelf life of food products such as jams and jellies by inhibiting the growth of microorganisms.

The increasing demand for confectionery products is one of the major factors driving the sugar market growth. The household consumption of sugar remains high due to increased popularity of homemade pastries, cakes, sweet rolls, and pies, among other dessert or bakery products. Rising standards of living and increasing purchasing power in emerging economies, which usually lead to higher consumption of processed foods containing high sugar content, such as dairy and soft drinks, are expanding the market share. Additionally, favourable government policies and agreements regarding the export, import and trade of sugar favour the market expansion.

Key Trends and Developments

Adoption of sustainable practices; rising consumption of sugar-based products, including processed foods; and technological improvements in the manufacturing process are the major trends impacting the sugar market expansion

Date	Company/ Government Agency	Announcement
Nov 2023	British Sugar	Invested 16.5 million pounds in making a sugar factory eco-friendly to reduce carbon footprint
Jan 2024	SucroCan Sourcing	Announced to invest USD 135 million in the construction of a sugar processing plant in Hamilton, Canada
Feb 2024	Bajaj Hindusthan Sugar	Announced a partnership with EverEnviro for the construction of Compressed Biogas (CBG) plants using biomass from sugar mills
Feb 2024	The Government of Bangladesh	Established a ve-year plan for modernisation of sugar mills to boost sugar production in the country

 

Trends	Impact
Increasing focus on improving sustainability throughout the value chain	Manufacturers are focusing on ethical labour practices and are integrating sustainable methods into the production process.
Rising consumption of sugar-based products, including processed foods	Increasing consumption of processed foods drives the demand for sugar, which finds widespread usage in products like jams, jellies, candy, chocolates, and others.
Usage of sugar byproduct in agriculture	Molasses, a by-product of sugar, is used in animal feed to enhance the digestibility and palpability of feed.
Technological improvements in the production process	Digitalisation of sugar manufacturing process is a key trend, as automation of the production process helps increase output, ensures consistency and quality, and minimises energy losses and environmental impact.

Sugar Market Trends

One of the prominent market trends is the growing demand for sustainably sourced sugar which involves practices such as no pesticide usage and reduced water consumption. Sustainably sourced sugar also involves the certification of Fairtrade which ensures that the farmers and labourers are compensated fairly for their work. Moreover, due to the health and wellness trend, consumers are readily seeking out organic sugar, which is produced without any synthetic pesticides and fertilisers.

Sugar producers are readily establishing new refineries and sugar mills to meet the growing demand for sugar. In January 2024, SucroCan Sourcing announced that is it investing USD 135 million for the establishment of a refinery in Hamilton, Canada. The rising demand for sugar as well as the low sugar production rate in Ontario, Canada presents a lucrative opportunity for the company.

Market Segmentation

"Sugar Market Report and Forecast 2024-2032" offers a detailed analysis of the market based on the following segments:

Market Breakup	Categories
Type	White, Brown, Liquid
Form	Granulated, Powdered, Syrup
Source	Sugar Beet, Sugarcane
End User	Food and Beverages, Pharma and Personal Care, Household, Others
Region	North America, Europe, Asia Pacific, Latin America, Middle East and Africa

White sugar accounts for a major sugar market share due to its neutral pro le which makes it compatible with a wide range of food products White sugar, a common type of refined sugar, occupies the major market share as it is the preferred sweetener for various foods and beverages. The food and beverage sector which includes sectors like confectionery, bakery, and dairy heavily relies on white sugar for its neutral flavour, colour, and preservative qualities. Moreover, the affordability of white sugar makes it a popular choice in both developed and developing countries. White sugar also possesses a long shelf life and does not require refrigeration to preserve its quality, which makes it a favourable choice.

Brown sugar is increasingly being demanded by health-conscious consumers as it is a healthier alternative compared to white sugar. It is rich in antioxidants, vitamins, and minerals, and supports overall human health. It also contains polyphenols, a compound which has been scientifically researched to have multiple health benefits, further boosting its popularity.

The food and beverage sector maintains its dominance in the market due to the rising use of sugar in processed foods The food and beverages sector holds the majority share in the sugar market as granulated sugar is widely used in various food and beverage products like baked goods, confectionery, soft drinks, and other processed foods. For example, in baked goods and confectionery, sugar can enhance the texture, volume, and colour of the product, whereas in bread and alcohol production, it can be used for fermentation.

Sugar Market Analysis by Region

The market growth in the Asia Pacific can be largely attributed to the dominance of domestic food manufacturers and increased consumption of packaged food products in the region. The food sector is the largest consumer of sugar in the Asia Pacific as there is a high demand for sweeteners and sugar-based ingredients in various food and beverage products, including baked goods, confectionery, soft drinks, and other processed foods. (Source:https://www.expertmarketresearch.com/reports/sugar-market)

Sugar: exports of major countries 2023/2024

Brazil has the highest export volume of sugar of any country, at about 35.97 million metric tons as of 2023/2024. The second largest sugar exporter, Thailand, had significantly less export volume compared to Brazil, at about 10 million metric tons of sugar that year. www.statista.com

Principal sugar exporting countries in 2023/2024

(in million metric tons)

The graph of ICE 11 (Raw Sugar) and LIFFE (White Sugar) exchange prices during last 3 years i.e., April 2021 March 2024 is given below: Chart 1: ICE 11 Price Movement From the above price graph of 3 years, it can be observed Sugar price has significantly rmed up during the Sugar Year 2022-2023 and Sugar Year 2023-2024 and one of the major factors is absence of Indian Sugar from global market and poor crop in Thailand leaving entire pressure on Brazil to feed global market.

ICE 11 (Raw Sugar Prices):

Raw Sugar prices started from the level of 14.71 cents/pound on 1st April 2021 lowest level during the period, touched high of 27.95 cents during November 2023 and closed at level of 22.5 cents / pound as on 31st March, 2024.

LIFFE (White Sugar Prices):

White Sugar prices started from the level of 423.4 USD/MT as on 1st April 2021, touched low of 420.5 USD during April 2021, high of 763.4 USD during November 2023 and closing level of 652.5 of March 2024 month.

Table 1: Global Balance Sheet

Unit: 000 Metric tonnes, Raw value

Year (Oct-Sept)	Production	Consumption	Surplus / Deficit	Import	Export
2008-09	142961	151520	-8559	48395	48390
2009-10	148391	151960	-3569	53993	53997
2010-11	156177	153096	3081	53870	53865
2011-12	163597	157962	5635	54325	54321
2012-13	171804	163572	8232	60655	60632
2013-14	174132	165282	8850	58361	57917
2014-15	169373	166888	2485	58259	58270
2015-16	164114	169978	-5864	66195	66322
2016-17	169080	172691	-3611	64730	64989
2017-18	180731	172240	8491	62823	62825
2018-19	176118	174308	1810	57927	58011
2019-20	169127	169180	-53	66193	65926
2020-21	168946	169708	-762	64853	64332
2021-22 (P)	172662	174327	-1665	62191	62512
2022-23 (P)	182142	175957	6185	61500	64486
2023-24 (P)	174839	176957	-2118	64373	61559

Source: ISMA

Table 2: Major Sugar producing countries: value Unit: 000 Metric tonnes, Raw value

S. No.	Name of Country	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23 (P)
1	Brazil	31049	29030	39654	38509	32067	42083
2	India	32479	33162	27411	31192	35920	32700
3	China	10633	10503	10415	10663	9560	8970
4	Thailand	14674	14441	8228	6976	10134	11025
5	U.S.A.	7758	7551	6908	7827	7566	7714
6	Mexico	6010	6426	5278	5715	8135	5250
7	Pakistan	5652	5552	4988	5502	7868	6657
8	Australia	4729	4102	3862	4303	3809	4373
9	Germany	4595	3825	3980	3737	4166	3649
10	France	5219	5060	4758	3354	4000	3666
11	Russia	6480	6292	7063	5391	5700	6250
12	Indonesia	2165	2267	2095	2294	2387	2440
13	Philippines	2127	2037	2146	2180	1936	1799
14	Argentina	1562	1617	1861	1627	1550	1484
15	Colombia	2378	2207	2179	2097	1842	2080
16	South Africa	2084	2307	2116	1861	1866	2054
17	Guatemala	2704	2930	2764	2565	2762	2609
18	Poland	2194	2190	2066	1987	2305	2008
19	Turkey	2704	2283	2587	2952	2520	2760
20	Ukraine	2095	1669	1312	1277	1450	1330
21	Egypt	2170	2519	2280	2720	2460	2360
22	Cuba	1086	1193	1200	824	482	355
23	Peru	1073	1146	1172	1103	1200	1280
24	Vietnam	1646	1174	769	709	747	871
25	Iran	1805	1520	1377	1463	1300	1300

(Source: ISMA)

Trends in Sugar Industry in 2024, Boosting Expansion Factors of Global Sugar

The sugar industry still enjoys a continuous expansion trend, supported by the production volume of sugar in Thailand and the demand for sugar consumption.

Key Issues to Impact the Direction of the Sugar Industry in 2024

The sugar industry in the year 2024 continues to show signs of expansion, despite severe drought. In fluencing factors include an upward-trending price. However, there is also a need to monitor the risks arising from the fragile global economy and export control policies of India. Key issues that will impact the direction of the sugar industry in the year 2024 are as follows:

1. The global economys expansion, even though the overall global economic landscape in 2024 continues to show a sustained growth trend, will have an impact on the demand for sugar products in the global market. Nevertheless, the recovery of the global economy in the coming year remains highly vulnerable due to the effects of rising interest rates and the slowing trend of the Chinese economy.

2. The export control policy of sugar by India will lead to an adjustment in global sugar prices in the coming year, given Indias significant role as a global sugar exporter. However, the implementation of Indias export control policy remains highly uncertain due to the lack of clarity in terms of timing and stringency in policy enforcement.

3. The drought issue, characterized by below-average rainfall in several areas of Thailand this year due to the El Nino phenomenon, will cause damage to sugarcane production in the 2023/24 growing season. Sugarcane is a water-intensive crop, and a significant portion of Thailands sugarcane cultivation relies primarily on rainwater.

(Source: Analysis by SCB EIC based on data from ISO, IMF, and UN)

The Sugar Industry will Continue to Expand in 2024

SCB EIC expects that the revenue of the sugar industry in 2024 is likely to expand slightly, supported by the trend of increasing prices. This helps compensate for the significantly reduced production volume, as Thai sugar production in the 2023/24 crop year was expected to decrease by 20.9%, reaching 8.7 million tons. This decline was in line with the expected 15.7% year-on-year reduction in sugarcane entering Thai mills, totaling 79.1 million tons, resulting from reduced yields per hectare due to drought conditions.

In addition, the central and northern regions will experience a significant reduction in sugarcane production due to more severe drought conditions compared to other areas. Meanwhile, the average export price of sugar in 2024 is expected to increase by 21.6% year-on-year, reaching $620.5 per ton. This aligns with the upward trend in global sugar prices, expected to continue next year. The global sugar market is anticipated to face an imbalance as India is likely to reduce sugar export quotas in the upcoming production season, leading to a further increase in global sugar prices in 2024, estimated at 26.1 cents per pound.

(Source: Analysis by SCB EIC based on data from the O ce of the Cane and Sugar Board and the Ministry of Commerce) The sugar export value in 2024, it is expected to stabilize at 3.6 billion U.S. dollars, while the domestic sugar market value will be at 5.5 trillion Baht, showing a 12.0% year-on-year expansion. The reasons behind this are as follows:

1) Increasing consumption volume in the country, following the economic recovery.

2) The increase in domestic sugar prices due to state policy adjustments.

In the intermediate term, the sugar industry continues to exhibit a sustained expansion trend, supported by factors such as the production volume of sugar in Thailand and the ongoing global demand for sugar, which is expected to increase continuously

The Challenges of the Sugar Industry in 2024

The growth of the sugar industry in 2024 and beyond will face various challenges. These challenges include economic uncertainty, agricultural policies of trading partners/competitors, changes in climate conditions, policies and measures to promote the transition to a low-carbon economy, and the sustainability trend.

1. The economic uncertainty and agricultural policies of trading partners/competitors contribute to the challenges faced by the sugar industry in 2024. The global economy remains vulnerable and highly uncertain due to unforeseen events occurring continuously. Additionally, the agricultural policies of various countries also exhibit a high degree of uncertainty. This situation will result in the sugar industry, heavily reliant on exporting to the global market, experiencing increased volatility.

2. Climate change will force sugar industry entrepreneurs to cope with more volatile business conditions, affecting both production costs and the uncertain quantities of raw materials. The unpredictability is particularly high in terms of both production costs and the uncertain quantities of raw materials.

3. Policies and measures to promote the transition to a low-carbon economy, such as international trade measures and carbon taxation, will increase the cost of operating sugar businesses. These pressures will lead to an adjustment in the costs associated with sugar production.

4. Sustainability is one of the crucial global megatrends that impact the sugar industry. Consumers and continuous industries using sugar as a raw material tend to increasingly prioritize environmental, social, and ethical issues in the future.

SCB EIC believes that participants in the sugar industry must swiftly adapt to address the aforementioned challenges and elevate their competitiveness sustainably in the global market. This includes preparing for the high uncertainty in economic conditions, international trade regulations, and policies of trading partners/competitors. For example, adapting to the production and trade policies of major trading partners, such as India and Brazil, and the self-su ciency policies in food by key trading partners. Diversifying exports to various markets is crucial to avoid excessive dependence on a single market. Furthermore, contingency plans for various scenarios, including investments to seize opportunities and mitigate the impacts of climate change and sustainable trends, such as supporting sugarcane farmers to invest in water sources or providing incentives for sugarcane farmers to harvest the fresh cane. Additionally, transitioning production systems towards a low-carbon economy is also emphasized.

Indian Sugar industry seeks urgent MSP revision and long-term ethanol policy from new Government

The sugar industry hope that the Government will revise the Minimum Selling Price (MSP) for sugar. The industry believes that, while the Government has established appropriate policy measures, the implementation of these policies has been inadequate. Additionally, the industry is advocating for a stable long-term policy on ethanol blending to support and encourage ethanol producers. They emphasise the need for a resilient policy framework that remains steadfast even in the face of challenges. ChiniMandi spoke to several sugar industry leaders and champions to gather their expectations from the new Government.

Deepak Ballani, DG, ISMA on behalf of the Indian Sugar & Bio-energy Manufacturers Association (ISMA), urged the new Government to prioritise some of the long-standing demands of the industry. "It is imperative that the Government revises the Minimum Selling Price (MSP) for sugar upwards and aligns it with the Fair and Remunerative Price (FRP) of sugarcane", he stated.

Prakash Naiknavare, MD, National Federation of Cooperative Sugar Factories (NFCSF), said that the new Government should seriously consider raising sugar MSP. The sugarcane price has been revised four times during the last four years but the sugar MSP has remained stagnant at Rs. 31 per kg creating tremendous financial stress, especially on the Cooperative sugar mills because the Cooperative banks when they provide pledge loan, they take the benchmark of Sugar MSP and not the prevalent sugar prices. This anomaly results in lesser availability of loans to the cooperative sugar mills.

Another important and relevant angle to the subject is that Dr. C. Rangarajans Committees recommendations, which are accepted by the Central Government and left to the State Government for implementation envisages 70-75% of total revenue to be the cane price, while the balance 25-30% has to be retained by the sugar mills to meet their operational expenses/including overheads. Naiknavre said that if one does the reverse calculation of this formula, the sugar MSP based on current years FRP logically will not be less than Rs. 40/- kg.

Sanjay Khatal, Managing Director, Maharashtra State Cooperative Sugar Factories Federation, Ltd, said that the Government should act on the existing policies that it has already introduced. Khatal said that there have been successive increases in the cane FRP, however the sugar MSP has remained unchanged since 2019. "When the sugar MSP was introduced by the Government, it was fixed after taking into account the Fair & Remunerative Price (FRP) of sugarcane. Hence, it is high time that an upward revision in sugar MSP is due. I hope the Government increases the MSP, which will enable sugar mills to make timely sugarcane price payment to the farmers," he said.

A similar sentiment is echoed by industry veteran Bharat Bhushan Mehta, Whole Time Director and CEO, Dalmia Bharat Sugar and Industries Limited, noting the need for an upward revision in sugar MSP due to increases in sugarcane FRP and other input costs over the years, including for SY24-25.

Sarita Reddy, Managing Director, Gayatri Sugar, also said that an upward revision of MSP which is long overdue.

Kiran Wadhwana, Owner, COMDEX India Ltd. and an important voice in the international sugar trade said a lot will depend on who will helm the Ministry of Food and Public Distribution post the new Government formation. "A lot will depend on the thought process and ideas he/she brings to the table. Upward revision in sugar MSP is long due, and we would want the new Government to prioritise that. ISMA has been requesting the Government to allow sugar exports considering higher closing stocks in the current season and expectations of a good Monsoon", he opined.

Rahil Shaikh, Managing Director of MEIR Commodities, added that the sugar industry faces significant issues, primarily regarding the sugar MSP. "The first and foremost issue is regarding sugar MSP. If you see there has been a steady increase in cane FRP without any corresponding increase in sugar MSP or ethanol prices, which has led to losses for the industry. The Government should immediately revise these two prices and mitigate the losses of the sugar mills," he said.

(Author: Dr.Kiattisak Khamsi)

Safeguarding ethanol interest

Government to revise the ethanol procurement prices for various feedstocks used in ethanol production, reflecting the FRP of sugarcane. The continuation of the Ethanol Blending Program (EBP) would greatly benefit from lifting the restrictions over ethanol production from juice and B heavy molasses, thereby enhancing the production capacity and contributing to the overall goals of the program," he said.

To sustain the Ethanol Blending Program (EBP) and support the financial liquidity of sugar mills and to ensure prompt payments to farmers, it was advocated for the implementation of the National Mission on Sugarcane (NMS) to ensure stability in sugarcane production and facilitate informed decision-making by the Government.

The industry association representing Cooperative Sugar sector expect Government to declare long-term Ethanol Blending Programme (EBP) for which Oil Marketing Companies (OMC) should confirm long term o -take commitments which would give confidence not only to the current ethanol manufacturers but also to the prospective investors who envisages to invest in creating distillation capacity pan India.

Another point of concern is that despite the new Ethanol Supply Year having crossed half way, the revised prices of Ethanol produced from Sugarcane juice, Sugar Syrup and "B" Heavy Molasses are still not announced. This sort of ambiguity creates uncertainty in the minds of all the stakeholders connected with the success of National Bio-Fuel Policy.

The Government should also announce the new ethanol prices for the next supply season much in advance by September. "This will help sugar mills to strategise their product mix- as to how much sugar and ethanol from C Heavy, B Heavy and Sugarcane Juice to be produced. In the current season, sugar mills had produced ethanol from B Heavy molasses, but were unutilised after the Government restricted ethanol production from B Heavy molasses. Though the Government has recently allowed its utilisation, there was a lot of uncertainty regarding the same. This should not be repeated next year. I feel that the Government should allow sugar mills to produce ethanol from B Heavy molasses and not restrict it at all. B Heavy molasses are a rich source of ethanol, and the sugar loss is also minimal" he stated.

It was further, emphasised the need to develop alternative feedstocks for ethanol production, such as sweet sorghum, which has potential. "I feel the Government should consider developing an ecosystem for that with a pricing policy on raw material and ethanol made out of it similar to what exists for sugarcane and other feed stocks used for ethanol production. This will promote clean, green & renewable energy," he said.

Mohan said that the Government should announce a floor/normative price for bagasse-based co-generation, which is a green fuel. "This will incentivise the sugar mills to produce bagasse-based cogeneration. This is very much required at this point as air pollution is a big challenge in most of our cities. We still have more than 60% thermal-based power supplies in the country", he added.

The former Director of NSI-Kanpur also stressed that there is a need to constitute a task force, which may suggest diversification and value addition beyond power, ethanol and CBG. The mandate of the task force may be to study, analyse and recommend how by-products & waste from the sugar industry can be utilised for producing other value-added products, particularly, through start-ups and developing entrepreneurship.

On ethanol policy, Shaikh said that there is an urgent need to have a long-term ethanol policy which is air-tight, and not impacted by changes in cane production etc. He stressed on sugar exports stating that there is a need for a tight policy on sugar exports. "India exported sugar in the past and we developed a brand for ourselves in the international market, which suffered this year, when we put in export curbs. For sugar trading, I feel there needs to be a long-term policy without any knee-jerk changes. This will protect our image in the global market. I think there should be a national policy to look at higher cane production and higher yield and recovery. If we have a sugarcane crop in the tune of 600-700 MMT every year, it will benefit our three policies vis-a-vis domestic requirement, ethanol production and sugar export," he said.

Mehta said that there should be revision in ethanol prices based on the formula already decided by the central government. He highlighted the need for a clear sugar diversion policy before the next season and suggested linking cane prices with sugar prices as per the recommendations of the CACP and recent Supreme Court orders. He also called for the implementation of the UP molasses policy and market rates for levy molasses at the state level, as well as a review of various levies on molasses.

Naiknavre further added that on the advice of Honble Home and Cooperation Minister, a comprehensive 10-year roadmap of Indias sugar sector is under process. This gigantic exercise has been assigned to a professional policy advocacy agency, which is expected to put up its first draft suggesting various policy reforms on long pending issues confronting the sugar and bio-energy sector and will also touch upon various future technology-based avenues.

He concluded that another initiative jointly undertaken by the Federation and ISMA and a full- edged proposal has been submitted to DFPD is for enhancing and stabilisation of production of sugarcane for sustainable achievement of EBP targets after meeting the sugar requirement of the country. He hoped that the new Government will take cognizance of the above initiatives and fulfill the expectations of Indias Sugar and Bio-energy Sector.

"Ethanol" Targets Sustainable Aircraft Fuel Development

Europe has unveiled a new strategic plan for sustainable aviation, titled ‘Destination 2050 A Route to Net Zero European Aviation. This represents the long-term vision for the aviation industry in the pan-European region under the Paris Agreement and the European Green Deal, serving as a roadmap for addressing global warming. Several European Union countries have urged stakeholders from various sectors to participate in the EU Pact for Sustainable Aviation, supporting sustainable air travel both domestically and internationally. The aim is to reduce carbon emissions to net zero by the year 2050, with an initial target of a 55% reduction in emissions from intra-European fights by 2033.

One in four of the key measures in transitioning to sustainable aviation is the use of Sustainable Aviation Fuels (SAFs), which is expected to contribute to a reduction of carbon emissions by up to 34%.

Ethanol is considered as one type of alcohol that is crucial to the fuel and alternative energy industry, playing a significant role in the countrys energy landscape. It is also one of the clean energy sources with high potential for sustainable development as aircraft fuel.

Sanchai Chasombat, M.D., the director of the Alcoholic Drink Organization, envisions the development of alcohol production technology to help reduce the costs of importing fuel and additives such as MTBE (Methyl Tertiary Butyl Ether) from abroad. Simultaneously, this e ort aims to increase value and stabilize agricultural product prices.

"Since the ethanol production process in Thailand primarily uses agricultural raw materials, the ethanol utilized in the fuel industry is distilled to a purity level of at least 99.5%. It is then employed as a component to generate essential energy, such as bioethanol, obtained by blending ethanol with gasoline. Consequently, the ethanol production industry plays a crucial role in the countrys multifaceted development, particularly in the energy sector," addressed Sanchai who also emphasized that the state-owned alcohol organization, with a responsibility for producing ethanol for both domestic and international markets, aimed to operate with the goal of continuous development to ensure the quality of the produced ethanol. This includes the adoption of environmentally friendly technologies to reduce greenhouse gas emissions in all processes, aligning with environmental policies in Thailand and globally.

The director of The Liquor Distillery Organization added that the organization had conducted studies and research to develop alternative raw materials for ethanol production, considering byproducts from the agricultural sector such as rice husks and corn cobs. These options aim to increase ethanol production efficiency, reduce production costs, and utilize agricultural residues instead of allowing them to become waste. This approach adds value to the remaining agricultural materials by reintegrating them for maximum benefit.

"Ethanol is a crucial component in the production of Sustainable Aviation Fuel (SAF), which is a biofuel produced from biological resources. SAF aims to reduce greenhouse gas emissions in the aviation industry. As a leading producer of high-purity ethanol, The Liquor Distillery Organization sees it as an important challenge to develop production technologies for ethanol that can be integrated into various industries, including sustainable aviation fuel production," explained Dr.Sanchai, highlighting that the general ethanol production process involves using natural raw materials, also known as bioethanol production. This process involves transforming plant-derived raw materials into sugars, followed by fermentation to convert sugars into ethanol. The ethanol is then distilled to obtain high-purity ethanol.

The director of The Liquor Distillery Organization stated that the raw materials used were agricultural crops such as grains, rice, corn, and root crops like cassava. Another popular type is the use of sugar-based raw materials in the production process, including sugarcane and sugarcane bagasse. After the breakdown process, sugar is obtained to be used in the fermentation process by adding suitable yeast. Good quality yeast should have the ability to efficiently convert sugar into ethanol. The ethanol used as a fuel must then undergo a separation process to achieve a concentration of no less than 99.5%.

"The Liquor Distillery Organization has plans and strategies to develop the production process by incorporating new raw materials to replace the use of sugarcane bagasse and cassava. The new raw materials fall into the category of cellulose fibers derived from agricultural residues such as rice straw and corn stover, which are used as substitutes," stated Dr.Sanchai. He also mentioned that the transformation of cellulose into ethanol has limitations, particularly in terms of high costs. Research and development into the ethanol production process from cellulose bers aim to enhance efficiency and reduce the costs of using various components, ultimately lowering production costs. If future advancements can reduce production expenses, readily available agricultural residues may become a significant alternative raw material for sustainable fuel industries. This is a direction actively pursued and continuously developed by the alcohol organization up to the present.

In addition, ethanol produced through biochemical processes is considered a non-toxic fuel due to more complete combustion compared to conventional fuels. Moreover, it utilizes raw materials derived from agricultural crops, making ethanol fuel a clean energy source suitable for various automotive applications. This includes ongoing development and experimentation for its use as aviation fuel.

"Currently, the fuel used in aircraft is generally traditional fossil fuels, which release carbon dioxide, contributing to global warming," Dr.Sanchai explained. He further stated that the aviation industry is focusing on research and development of Sustainable Aviation Fuel (SAF) as a sustainable alternative, aiming to reduce carbon dioxide emissions in line with future Net Zero plans.

On the other hand, the use of bio jet fuels in aviation has limitations in terms of production quantity, as it requires a large volume of biomass as raw material. Additionally, there are high costs associated with the production process. Plans and policies are driving the development of ethanol for sustainability, with the goal of utilizing agricultural residues as a future source. Although the raw materials may vary, the quality of ethanol produced remains consistent. If commercial viability is achieved on a large scale, it will impact the development of bio jet fuel production processes for sustainable aviation in the future.

Aircraft Fuel, SAF, Thailand Ethanol

ISMA MOOTS STRATEGIC POLICY INTERVENTIONS TO MEET 20% ETHANOL BLENDING TARGET BY 2030

To address the challenges faced by the sugar industry and meet the 20 per cent ethanol blending target by 2030, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has stressed the need for strategic policy interventions by the Centre. The drop in Indian sugarcane production due to the global climate phenomenon, EL Nino, has significantly impacted ethanol production, with a sudden halt in production from mid-December 2023.

Despite the drop in production, ISMA asserts that India could have produced an additional 250 crore litres of ethanol by diverting a further quantity of around 25 lakh tonnes of sugar, even after meeting the full domestic demand requirements. This surplus could have been almost adequate to meet the current ethanol year requirement from the sugar industry.

Prabhakar Rao, President of the ISMA said, "The Indian sugar industry is well-positioned to meet the governments ambitious 20 per cent ethanol blending target till 2030. Our industry can contribute a significant 55 per cent of the ethanol requirement, and even increase that to up to 60 per cent if we can get stable policy support and investment on sugarcane production stabilisation."

However, several challenges need to be addressed, including the availability and a ordability of raw materials for ethanol production.

Benefitting all stakeholders

To enable the sugar industry to meet the Ethanol Blending Requirement, Rao suggested that the Minimum Support Price (MSP) for sugar and ethanol prices for various feedstocks be fixed harmoniously, while announcing the Fair and Remunerative Price

(FRP) for sugarcane. This will ensure the financial viability of the industry and attract more investments, leading to capacity creation that can help meet domestic sugar requirements and produce ethanol as per the EBP programme, he said

ISMA emphasises the need for stakeholder collaboration, regulatory tweaks and international inspiration to transform the sugar industry. The successful implementation of these policy interventions is crucial not only for sustainable energy practices but also for the financial strength of the sector and the welfare of farmers.

As the industry navigates these challenges, Rao urged stakeholders to collaborate, innovate and take positive action to ensure a smooth transition towards a future powered by renewable resources, paving the way for a greener and more sustainable tomorrow.