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G. Srinivasan

WITH the sugar year having begun, on October 1, the industry is quite optimistic about a likely turnaround in its fortunes. Sugar prices are up 20 per cent over last year. The Indian Sugar Mills Association (ISMA), the apex industry body, is also hoping for better days.

ts President, Ms Rajshree Pathy, has through several initiatives seen the industry through the bad times.

Ms Pathy divides her time managing the Rs 400-crore Rajshree Sugars and Chemicals Ltd, a Coimbatore-based company with interests in sugar, distillery, power cogeneration and bio-technology, and being the President of ISMA. She has been in the business for more than 13 years.

Ms Pathy was elected ISMA President last December, and is in her final months of her tenure. When she took charge she set out to bring in the ethanol programme, which has now been flagged off.

"I think we have also very successfully stopped the import of white sugar and brought in raw sugar to be refined by the mills which has, in turn, helped many a sugar mill become viable. White sugar import benefits only the traders and not the industry," says Ms Pathy. Quite candidly, she says: "We all have the same agenda. We want decontrol of the industry. We don't want high State-advised cane prices.

We are happy with the Statutory Minimum Price, which is a fair one. We are all for by-products value-addition. We are all for economies of scale, as we want larger factories. We are all for paying good price to farmers.

We are all for a healthy demand-supply situation whereby the average citizen gets sugar at a fair price, the farmer gets paid for his cane at a fair price and the industry is allowed to make profit like every other industry and is not constantly asked to subsidise."

Even as the sugar industry is riven by politics and is subject to interventionist policies, Ms Pathy believes the industry is very vibrant. "We are the second largest in the world and if you remove the politics out of sugar, it will be a great industry ."

Ms Pathy spoke to Business Line on a range of issues that confronting the industry today. Excerpts from the interview:

On the outlook for the new sugar season:

We are quite happy with the good opening stock for the season. We are not anxious about shortages. Even the flood situation in Maharashtra has not really made a big impact because it is not as if the crop has been destroyed... it will come for crushing.

I do not think that there is any great anxiety about short supply of raw material too. From the industry perspective, we are pushing for decontrol. We are not quite clear why the Minister of Agriculture and Food has deferred it.

Perhaps, the Government believes there will be a sharp dip in prices and that the cooperative sector will be affected.

The other anxiety is the elections coming up in Uttar Pradesh and Tamil Nadu, the two largest sugar-producing States. The recent announcement of a high State Advised Price by Tamil Nadu is a bit of a setback for sugar factories.

It all depends on other cuts in State purchase taxes and so on that could really help the industry.

Similarly, in Uttar Pradesh, huge incentives for new investments have been announced. There is some fear among the UP sugar mills about some of them being marginalised on account of new and fresh capacities coming under the new scheme.

In Maharasthra, production has fallen in the cooperative sector.

The challenge for the industry is how to consolidate over the next five years. The financially weak ones will be weeded out, this is the story of globalisation — the consumer gets the maximum benefit when the commodity is being produced at the cheapest price. That is why we are looking at larger units, into more diversification into power, alcohol, ethanol and so on. That will allow factories to be able to pay higher cane prices to farmers and at the same time maintain a healthy profit margin.

On the growing awareness of using bio-fuels such as ethanol:

Ethanol, a natural oxygenate, as the blend fuel with petrol has been the significant achievement of the ISMA over the last year.

For the first time, we have established that the ethanol programme is very important for India and if it has to be sustainable, it must be pushed right from the top. The ethanol programme has now come under the Planning Commission and no matter which political party is in power, it will remain on the agenda of the Plan panel.

For the programme to be successful, we need the cooperation of every State government, even as each wants a certain amount of alcohol/molasses retained for the potable alcohol segment. Allocation to ethanol comes next.

Comparison with Brazil is not right because Brazil started decades ago and thus has a large lead. There the government has totally decontrolled the sugar industry and 50 per cent of sugarcane production goes to ethanol production.

The story is no different in the US, the largest corn-based ethanol producer. Even today, the US government support continues at 54 cents per gallon on ethanol-blended petrol.

In India, ever since the programme began in 2002, about 90 ethanol producers supplied 300 million litres of ethanol to oil companies based on competitive bidding.

Even as the industry sought an incentive price to promote ethanol on a long-term basis, the Government rejected it and insisted on purchasing ethanol only on a competitive basis. The industry accepted the challenge and is delivering.

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