The Hindu Business Line : Ethanol, cogen help sugar mills stay afloat

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New Delhi Feb.16 The crash in sugar as well as molasses and bagasse prices has shifted the spotlight to companies that have cushioned themselves somewhat through timely commissioning of cogeneration and ethanol facilities.

Consider Balrampur Chini Mills Ltd (BCM), which already has an installed cogen capacity of 160 MW, of which 85 MW is the saleable power that can be exported to the grid. By October, the company projects these at 210 MW and 116 MW, respectively.

"During 2006-07 (October-September), we will sell around 50 crore units (kilo-watt hours) at Rs 2.90 a unit. Next season, electricity sales will top 70 crore units", said Mr Kishor Shah, Director (Finance), BCM.

Thus, in this season alone, the company expects cogen revenues of Rs 145 crore. In addition, sale of seven crore-odd litres of alcohol (including two crore litres of ethanol) at an average Rs 22 a litre realisation would fetch some Rs 154 crore. All put, Balrampur Chini's non-sugar revenues will cross Rs 300 crore, or a fourth of the Rs 1,200 crore from the eight-lakh tonnes (lt) of sugar it plans to produce at an average Rs 15 a kg.

TASL de-risking

Equally well protected against the downswing in the sugar cycle is Thiru Arooran Sugars Ltd (TASL). TASL, along with its associate, Shree Ambika Sugars, emerged as Tamil Nadu's No. 1 sugar producer during the 2005-06 season, at 3.46 lt, ahead of EID Parry's 3.43 lt and Sakthi Sugars' 3.09 lt.

More significant though is the Group's cogen business, which recorded billings of Rs 124.25 crore on power sales of 39.35 crore units, out of an aggregate generation of 56.02 crore units. Revenues from cogen alone, thus, amounted to a fifth of the Rs 590 crore or so from sugar.

"With sugar prices tanking, the contribution of cogen to our income as well as margins would rise further this season. To that extent, we are substantially de-risked", noted Mr Ram Tyagarajan, CMD, TASL. The Group now has an installed capacity of 103.1 MW, of which 59.4 MW is the exportable power during the season and 83.3 MW in the off-season, when mills do not consume steam or energy for crushing.

Sold on alcohol

As against this, take the country's top sugar producer, Bajaj Hindusthan Ltd (BHL). During the 2005-06 season, the company's non-sugar business was largely from alcohol, which generated Rs 134.34 crore out of its total revenues of Rs 1,511.91 crore. Although, it has reportedly signed power purchase agreements (PPA) for 90 MW, BHL has not been as aggressive in commissioning the proposed capacities.

The company has instead put its `eggs' in alcohol, with capacity set to more than double from 320 kilolitres per day (KLPD) to 800 KLPD by this season-end. That would make it the leading distiller by a long way. But still, its likely revenues of around Rs 330 crore from selling 15 crore-odd litres in 2006-07 will be much below the Rs 2,100 crore from the 13-15 lt of sugar.

The other diversification that BHL has opted for is manufacture of medium density fibre and particle board from the huge volumes of bagasse its mills would churn out as by-product during cane crushing.

"Our three board-making units will be operational by November," a BHL spokesperson told Business Line.