The Hindu Business Line : No threat to sugarcane supplies in UP: Kushagra Bajaj

"When all the mills in the three districts are crushing less than 50 tonnes out of every 100 tonnes of cane produced, how would our entry create shortages?"

New Delhi , July 26

BAJAJ Hindustan Ltd (BHL) has refuted allegations that its move to set up four greenfield sugar units with aggregate sugarcane crushing capacity of 28,000 tonnes per day (tcd) in western Uttar Pradesh will disrupt cane supplies to existing plants in the region, undermining their viability.

In an interview to Business Line, the Chief Executive of BHL, Mr Kushagra Nayan Bajaj, said there was no dearth of cane in the area and "our entry will only benefit farmers".

The proposed plants — each of 7,000 tcd capacity — are to be located in Kinnouni (Meerut), Bilai (Bijnor), Thanabhawan and Bhaisana (both in Muzaffarnagar).

This is in addition to BHL's existing units at Golagokarannath (13,000 tcd) and Palia Kalan (11,000 tcd), which are both in Lakhimpur Kheri district of eastern Uttar Pradesh.

Quoting official statistics, Mr Bajaj said total cane production in Meerut during 2002-03 and 2003-04 sugar season was 713.70 lakh quintals (lq) and 729.05 lq respectively, whereas the four mills in the district — including the 10,000 tcd plant of Mawana Sugar of Siel Ltd and the 8,000 tcd Daurala Sugar Works of DCM Shriram Industries — together crushed only 336.22 lq and 327.77 lq. This corresponded to a drawal ratio of only 45 per cent-47 per cent.

Similarly, in Bijnor total production was 1,349.38 lq in 2002-03 and 1,326.22 lq in 2003-04, against which crushing by the district's six sugar mills — among others, the Dhampur unit of Dhampur Sugar Mills, the Seohara factory of the KK Birla Group's Upper Ganges Sugar (both 10,000 tcd) and the 6,500 tcd Bundki plant of Dwarikesh Sugar — was just 553.30 lq and 479.31 lq, representing a drawal ratio of 36 per cent-41 per cent.

Finally, in Muzaffarnagar, the existing mills crushed only 615.28 lq in 2002-03 and 580.84 lq in 2003-04, against corresponding production of 1,228.56 lq and 1,396.69 lq in the district. The drawal range here, too, worked out to only 41per cent-50 per cent. The eight existing mills in Muzaffarnagar include the 11,100 tcd Khatauli plant of Triveni Engineering, the 5,500 tcd Shamli factory of Upper Doab Sugar and the 5,000 tcd units of Dhampur Sugar (Mansurpur), Siel Ltd (Titawi) and Monnet Sugar (Unn).

"When all the mills in the three districts are crushing less than 50 tonnes out of every 100 tonnes of cane produced, how would our entry create shortages? Rather, the area has so much excess cane, which farmers are now having to sell at low prices to local gur (jaggery) manufacturers or even resort to burning," Mr Bajaj said.

He further argued in favour of dismantling the present `zoning' system, where all the cane grown in a given area is reserved for a particular mill. This is done by enforcement of a minimum radial distance of 15 km between an existing mill and a new mill.

"This system was justified in the old days, when very little cane was being grown and mills had to be assured adequate supply of raw material, just as cement plants have guaranteed access to limestone through exclusive 100-year mining leases," Mr Bajaj said.

But the same logic did not hold today, when cane availability was not a real problem. "We have a scenario now, where farmers are not paid in time and burdened with arrears of Rs 3,000 crore from mills. Yet, they have no freedom to sell their cane to any mill, except to the one they are bound to by the Cane Commissioner. The time has come to completely de-reserve cane area and allow farmers to choose which mill to supply through open bidding," Mr Bajaj said.

The four greenfield units, involving an estimated outlay of Rs 550 crore, would be `pure' sugar plants. "We are not interested in co-generation, as there is no real money in sale of power. We may consider ethanol production at a later stage, but we are already the country's No. 1 ethanol manufacturer," he added.