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  Sh. Gautam R. MorarkaCHAIRMAN'S SPEECH AT 21st ANNUAL GENERAL MEETING                                  

Dear friends,

It gives me immense pleasure to be amongst you on this august occasion of the 21st Annual General Meeting of your company. First, I welcome all of you and then I would like to share my views.


Globally, few perceptible changes are witnessed.

a. Devaluation of Chinese currency has caused tremors across the Globe. Most countries displayed panic and kneejerk reactions. Currencies of most countries had to navigate, discover and adjust to new exchange rates with USD and other currencies.

b. Greater volatility and uncertainty prevailed as changing scenario presented higher peril for the global economy in 2015.

c. Oil prices have declined and are continuing to fall, mainly on account of increased production of oil by the US and also on account lesser off-take, world over.

d. Fate of a few European economies, mainly the Greece hangs in balance as they have received yet another dose for survival and rehabilitation

e. Fears of upward revision of Fed rate by the US unfounded. The same could have resulted in flight of capital out of many developing nations.

f. USD appreciating and weakening of most other currencies, notably the euro), and the new quantitative easing program of the ECB are just a few examples of the economic factors at play.

g. There is increased geopolitical uncertainty related to the Russia-Ukraine and Middle East conflicts (mainly on account of rise in militancy by ISIS), as well as increased concern about the economic and political future of the Euro Area and European Union.

While the overall global real GDP growth average is estimated to be 3.3 percent, the global average reflects a combination of upsides and downsides. Downward revision are primarily because of a major GDP decline in Russia (from +0.8 to −3.5 percent) and moderate declines in the Euro Area (1.6 to 1.4 percent), Japan (1.1 to 0.6 percent), and
Brazil (1.5 to 0.5 percent). Upward revisions include the United States (2.6 to 2.9 percent), Mexico (2.8 to 3.5 percent), and India.

The United States will continue to register stronger growth than its peers. European economies have more scope to recover, and the weakened euro could help offset negative effects from slower exports to emerging markets.


a. India is expected to overtake China as the fastest growing emerging economy in 2015-16 by clocking a growth rate of 7.5 per cent. Increased base effect is bound to pull down the growth rate of China.

b. India's growth is expected to strengthen from 7.2 per cent in 2014 to 7.5 per cent in 2015. Growth will benefit from recent policy reforms, consequent pick-up in investment, and lower oil prices. However the pace of reforms is rather tardy. Non-promulgation of GST Act and stiff land acquisition laws are stifling growth.


a. Unprecedented sugar glut sweeps across the globe. Sugar stockpile biggest ever. Successive 5th year of surplus production

b. International raw sugar price is hovering around 11.30 cents per pound, slightly better that the 7 year lowest raw price of 10.30 cents per pound recorded a month ago. White sugar price in the band of 340 to 360 USD PMT

c. Thailand, Brazil among others are key exporting Nations. Many sugar mills in Brazil facing closure owing uneconomic and unviable operations.

d. South central Brazil, main sugar producing area initially impacted by dry weather and draught. Rains, then revived the harvest. Heavy rains thereafter, however have dragged the production estimate to 29.8 MT. Further change in climate will however warrant fresh change in estimates. Ethanol price will play a significant role

e. China, main importing country as the sugar production is lower on account of reduction in mandated sugarcane price.

f. Cane harvest area in India & Thailand has expanded.

g. Global sugar stock expected to be more than 18 million tons. Global sugar balance heavily skewed.


· Year 2014-15 is third consecutive sugar surplus year. Production for 2014-15 – 28.3 MT. Maharashtra producing more than 10 million tons of sugar. In the crushing season 2015-16, once again production is expected to be in excess of 28 MT

· In Uttar Pradesh, production > 7 million tons, proving wrong all estimates of lower production. Recovery substantially better than last year (Average recovery 9.50% as against 9.25% last year)

· Sugar stockpile increasing – expected closing stock more than 10 Million Tons. Stock as % of take-off is alarming at more than 40%

· Sugar prices under intense pressure. From a high of Rs. 3,100 per quintal at the start of season had dropped to less than Rs. 2,150 two months ago.

· Government has announced compulsory export of sugar and is in the process of promulgating order for the same.

All sugar mills to have export obligations during the crushing season 2015-16. Mills in the hinterland to pay arbitrage amount to mills in South & West who will physically export sugar.

· It is expected that on account of compulsory exports, domestic prices will perk up and the loss on export will be significantly less than the benefit that would accrue to sugar mills on account of better prices in the domestic market.

· Prices have now revived by Rs. 300 per quintal on the announcement of compulsory export of 4 MT.

· Whether price rally sustainable? No immediate answers as much will depend on actual export trades.

· At current sugar prices, mills cannot afford to pay F & RP, not to speak of SAP. Sugarcane arrears are in excess of Rs. 10,000 crores

· Central Government export subsidy of Rs. 4,000 PMT has failed to kick off exports. Given the lower international price & depreciating Real (Brazilian currency) vis-à-vis USD, Brazil continues to export in spite of lower International price

· Central Government has provided impetus to produce ethanol by announcing an attractive price for ethanol. Way forward is to increase production of ethanol. Policy to produce ethanol from ‘B’ heavy molasses necessary

· Central Government mulling barter of sugar with pulses in the International Market Issues/ challenges faced by the Indian sugar industry: Indian sugar industry faces challenges galore. Raw material prices which are either Central Government regulated or State Government regulated have increased year after year.

However sugar prices are on a downward spiral. Industry suffers from rank bad economics. Sugarcane prices have risen so high that the farmers find the crop commercially attractive vis-à-vis all other crops, so much so that farmers are encouraged to grow the same regardless of when they are paid for it.


Sugar production in the country has been estimated at 29 million tons in the season 2014-15 as against 24.4 million tons in the previous season. Continuous hike in sugarcane price led to an increase in the cane area, cane production vis-a-vis sugar production. Besides, carryover stocks of about 7.5 million tons of sugar from the previous season created a glut in the domestic sugar market. Meanwhile, domestic consumption remained at about 24 million tons. Similar situation prevailed in the world sugar market due to which India could hardly export about 0.08 million tons of sugar against 2.12 million tons in the previous season. In the given scenario, domestic sugar prices fell steeply whereas the cane price was record high. This resulted into heavy losses to the sugar industry.


· For season 2014-15, the U.P. Government announced a SAP of Rs. 280 per quintal, same as last year. It had also announced benefits of Rs. 40 per quintal linked to benchmark price of sugar & by-products between 1.10.2014 to 31.5.2015. Reliefs of Rs. 28.60 per quintal formalized and disbursed recently · In making total payment of Rs. 280 per quintal, sugar mills are in arrears > Rs. 5,000 crores.

· Government of India has announced soft loan of Rs. 6,000 crores to help the industry to clear sugarcane dues. Entitlement of UP State approximately Rs. 1,500 crores. Disbursal of the same will further reduce the arrears

· Financial position of most sugar companies, yet in dire straits since current level of sugar prices not good enough to pay even Rs. 200.

· The North – south disparity and the advantage sugar mills in Maharashtra & south enjoy in terms of lower sugarcane price and higher recovery continues to hound sugar mills Uttar Pradesh.

· Recent announcement of compulsory exports have helped rebound sugar prices.


· Group recovery during season 2014-15, highest in north India – 10.78%, - higher by more than 0.5% as compared to previous crushing season

· Losses continue owing to declining sugar prices.

· U.P. Government had disbursed relief of Rs. 28.60 per quintal on cane purchases during the season 2014-15. The amount has been directly disbursed into the accounts of farmers.

· Company has been sanctioned soft loan of Rs. 56.29 crores and the same is in the process of being disbursed. It translates to an amount of approximately Rs. 24 per quintal of sugarcane purchased.

· Impressive recovery recorded at all three units. Recovery at DN plant was 11.11% (highest ever in North India) whereas at DP plant, recovery of 10.98% was recorded.

· During the season 233 lac quintals of sugarcane was crushed as against 208 lac quintal crushed in the previous crushing season. Improved farm yield (on account of Co 0238)and lesser diversion of cane to alternative sweeteners contributed to increased availability of sugarcane.

· Cogenerated power worth Rs. 12,684 lakhs was exported to the state grid in the accounting period of 18 months as against Rs. 7,181 lakh in the previous accounting year. However, multiple barriers on sale of molasses adversely impacted the top-line and cash-flows of sugar companies including your company as well.

The overall negative environment prevailing in the industry impacted the working of your Company as well during the period under review. Higher sugarcane cost vis-a-vis lower sugar sales realization together pulled the performance down.

Financial Score Card (Rs. Lacs)

TRENDZ: 2015-16

Sugar production in the country is estimated at 28 million tons against the consumption of about 24 million tons. However, with more than 11 million ton surplus sugar from the previous season, the market is currently facing the bearish trend. Spot prices are hovering around Rs. 2,450 per quintal. However with the order promulgating compulsory export of 4 million tons of sugar, the prices are expected to rev up.

Much will depend on the SAP to be announced by the State Government. Central Government has already announced FRP of Rs. 230 per quintal linked to recovery of 9.50%.
We do appreciate the measures taken by the government which will provide some relief to the crisis ridden sugar industry. However, linkage of sugarcane and sugar price will play pivotal role for sustenance of the sugar sector in the long term.


Few steps that can be taken to help rejuvenate the industry.

a. Linking the sugarcane prices to the revenue from sugar industry through a value sharing ratio – one of the important recommendation of Rangarajan Committee Report. For the long term survival & sustainable growth, this alone is a rational solution.

b. Abolishing the reservation policy for sugar by-products like molasses.

c. Allowing direct manufacture of ethanol from Sugarcane & providing remunerative price for sale of ethanol & increasing mandatory mixing of ethanol in petrol to 10% & then gradually to 25% as is being done in Brazil & other developed Countries

d. Providing subsidies to millers for R&D – especially in the area of recovery improvement and yield improvement. Encourage development & propagation of improved & early varieties.

e. Creation of Sugar equalisation fund to smother the cyclical effects of Sugar sector & use these funds in leaner times for survival of Sugar sector.


I would like to take this opportunity to thank you for all your support. I seek your continued support in our endeavor to achieve better results in future. I would also like to use this opportunity to thank all our business associates, our employees, our farming brethren who have reposed immense confidence in us, our Banks and Financial Institutions
who have proved to be our reliable and trustworthy friends, various Government agencies and last but not the least the illustrious members of our Board who have provided their valuable guidance whenever required.



19th September 2015

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