The Hindu Business Line : E.I.D. Parry's sweet experiments pay off

PARRYS Corner in Cuddalore, a southern district in Tamil Nadu. And not just one but 30. This must sound strange to those familiar with the business district of that name in Chennai. But to E.I.D. Parry, to which that corner of the city owes its name, it is part of a business strategy.

A strategy that has helped turn around a centuries old sugar factory near Cuddalore into a leader in its segment. What is driving the change? A tight rein on costs, modernisation and value addition are key factors in success.

Listen to its President, Mr P. Rama Babu, talk: information technology, branding, partnering with farmers, integration... along with a good deal of traditional hard-nosed business sense: keep costs down, add value, increase margins... and you get an idea.

Here the company is attempting to set up computer-equipped kiosks, dubbed Parrys Corner, to provide information to farmers on sugarcane cultivation and credit facilities. They can also keep track of the status of sugarcane sales and payments with the company, Mr Rama Babu said.

This has helped pave the way for the management and the farmers to work together to arrive at "a mill-affordable cane price". Ideally, cane prices should be within a band of 65 - 72 per cent of the cost of production of sugar. Any lower the farmer is hit and any higher the mill is hit. This is a balance that both must maintain since one cannot do without the other, he said.

E.I.D. Parry operates four sugar factories that crush 35 lakh tonnes of sugarcane a year purchased from about one-lakh farmers.

The Nellikuppam mill, where Mr Rama Babu was addressing a team of journalists on a company-organised tour of the sugar mill last week, has been around since the 1850s, and is today an integrated mill that processes sugarcane into a wide range of products.

Over 25,000 farmers supply cane to the Nellikuppam mill. But E.I.D. Parry does not face the heartburn associated with the annual negotiations on cane price. The company has taken the farmers into confidence on sugarcane prices, sugar prices, company's income and taxes. "What the government does not take away, we share," Mr Rama Babu said.

Apart from sugar, the mill also produces ethanol and generates power through cogeneration. Elsewhere, at the Pugalur unit, E.I.D. Parry has decided to set up a cogeneration unit. Here again, when the industry benchmark is Rs 4 crore investment for every MW of power, E.I.D. Parry can do it for Rs 3.5 crore.

Keeping costs down is a creed. Look at Pudukkottai, he said, just about 60 employees aged around 20 - 22 look after the entire unit. Non-core areas are outsourced or contracted out. Keeping the numbers of employees down and farmers up is key to a mill's success. E.I.D. Parrys' cost of sugar production is among the lowest at about Rs 10.50 a kg.

At Nellikuppam, it will soon start making branded refined sugar, which will hit the markets in a matter of weeks. Also in the pipeline are niche products, such as fortified sugar and varieties with low chemical residues. Market surveys had shown that the housewife is willing to pay up to Rs 22 a kg for quality. The refined sugar will be a high quality product. The company has set up a 30,000 tonne a year facility, and ideally most companies can earmark about 10 per cent of their production for branding, he felt.

When asked why they are so optimistic when others have failed, Mr Rama Babu asserts confidently, "To E.I.D. Parry branding is a religion." Branding of sugar may have failed for others earlier. But, "We are experts. We have a strong market understanding."

But the company is also not forgetting its raw material — the cane varieties. E.I.D. Parry will be among the first private sector sugar mills to launch its own varieties of sugarcane. They are in the process of being developed and farmers can look forward to them in about two years.

According to Mr Rama Babu, sugarcane is the best bet for the farmers. With an assured price and market, there is no other crop that can match it, he said.

He does not agree that being water intensive is a problem. Look at the sugar mill operations, water effluent is being used for irrigation. Even the effluent from the distillery is being used for crops, as is being done in other sugarcane cultivation areas worldwide. It is only here that distillery effluents are treated as pollutants. "There is no political empathy for industries," he said.