The Hindu Business Line : Sugar mills upset with BHL's move to enter western UP — Lobby for changes in radial distance norm

BAJAJ Hindusthan Ltd's (BHL) move to set up four new greenfield sugar ventures in western Uttar Pradesh has ruffled the feathers of all entrenched players in this cane-rich belt.

The latter, who allege that BHL is poaching on the sugarcane area nurtured by them for decades, are now lobbying for an increase in the minimum radial distance norm between an existing and a new mill from the present 15 kilometres (km) to 40 km, even as the `upstart entrant' is demanding complete `de-reservation' of cane area.

The Rs 466-crore Shishir Bajaj-controlled BHL operates two plants at Golagokarannath and Palia Kalan — both in Lakhimpur Kheri district of eastern UP — with individual cane crushing capacity of 13,000 tonnes and 11,000 tonnes per day (tcd), respectively. The company is now making an aggressive foray westwards, with plans to establish four new units of 7,000 tcd each in Kinnouni (Meerut), Thanabhawan (Muzaffarnagar), Bilai (Bijnor) and Saharanpur. Of these, the Kinnouni plant — involving an investment of about Rs 155 crore — is scheduled for commissioning by December, with the others taking off by October 2005.

The units that perceive a threat from the Kinnouni plant, by way of diversion of cane supplies, include the 8,000-tcd Daurala Sugar Works of Mr Tilak Dhar's DCM Shriram Industries and the 11,750-tcd Khatauli factory of Mr Dhruv Sawhney's Triveni Engineering & Industries. The proposed Thanabhawan venture will hit the Titawi Sugar Complex of Mr Siddharth Shriram's Siel Ltd, the Unn factory of Mr Sandeep Jajodia's Monnet Sugars and the Shamli unit of Ms Rupa Lal's Upper Doab Sugar Mills — all having capacities of 5,000 tcd each.

The planned Bilai plant is similarly close to the 10,000-tcd Seohara factory of the KK Birla Group's Upper Ganges Sugar & Industries and the Dhampur unit of Mr V.K. Goel's Dhampur Sugar Mills — both with 10,000 tcd capacity. While BHL is yet to finalise its site at Saharanpur, the district already has a number of mills, including the 10,000-tcd Deoband plant of Triveni Engineering and the 3,000-tcd Shakumbari Sugar and Allied Industries of the Dainik Jagran Group.

The existing western UP-based mills say that BHL's proposed four units with aggregate crushing capacity of 28,000 tcd — which would make it the country's No. 1 player, at 52,000 tcd, ahead of the KK Birla Group (38,500 tcd), Dhampur (31,000 tcd) and Mr K.N. Saraogi's Balrampur Chini (29,000 tcd) — will de-stabilise cane supplies, rendering their plants unviable.

``It is we who have encouraged farmers in the region to grow more cane by providing various inputs and extension services. BHL would basically be capitalising on our sustained good work, which is tantamount to poaching,'' said a K.K. Birla Group representative. As a pre-emptive measure, the existing units, through the Indian Sugar Mills Association (ISMA), are seeking restoration of the 40-km radial distance norm between an existing and new mill, prevailing prior to July 23, 1990, when it was reduced to 15 km and retained even after the sugar industry was officially de-licenced on August 31, 1998.

According to ISMA — of which BHL is no longer a member — enhancing the minimum distance criteria to 40 km is necessary because "only mills with 10,000 tcd and above capacity can survive today.'' But this requires assured access to cane, which higher radial distance criteria alone can fulfil. ``The 15-km norm made sense when the minimum viable capacity was considered at 2,500 tcd. The new situation calls for enhanced reservation of cane area,'' an ISMA official pointed out.

BHL, however, has argued that cane reservation rewards inefficient mills by conferring monopoly over the entire crop grown around their vicinity. Further, it militates against growers, who cannot supply to any mill other than the one they are compulsorily `bound' to by the Cane Commissioner. ``Our entry will benefit farmers and for that reason, we will also oppose any proposed increase in the distance norm,'' a company spokesperson said.

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