Wednesday, April 05, 2006

Bihar sugar mills writhe under poor infrastructure



ANALYST'S VIEW
Business Standard.
Kunal Bose / Mumbai April 03, 2006

A vibrant sugar industry anywhere will necessarily be resting on the tripod of a sufficiently long crushing season, a good rate of recovery of sucrose and making the most of by-products like bagasse and molasses.

If this agro-based industry in Bihar has very little to show for, it is because on all the three counts, it has proved to be a laggard.


Indian Sugar Mills Association statistics will show that the nine operational factories in Bihar had enough cane to crush for 130 days during the 1999-2000 season. But the supply of cane had shrunk since and the factories could be operational for no more than 82 days in the last season.

The falling cane availability and then mostly of indifferent quality played havoc with the industry and the benighted Bihar, which once housed 20 per cent of the country?s sugar factories, is now left with only nine mills.

Some of the surviving mills would in all likelihood have gone under had not the commodity begun the bull run since April 2004. Ideally, as industry officials will say, sugar factories in the state should be engaged in cane crushing for at least 165 days in a year.

But for this to happen, infrastructure deficiencies will have to be overcome through joint efforts of central and state government and cane development work.

Farmers? rewards for his efforts are decided by the recovery of sugar from the cane they supply to factories. The health of the industry is also decided by the degree of sugar extraction from cane.

The rate of sugar recovery in Bihar has regularly remained below the national average and far below what factories in Maharashtra and Karnataka manage to get out of cane.

No less disappointing for the Bihar industry is the fact that cane productivity at around 40 tonne a hectare in the state is way below the national average of 60 tonne a hectare. The blighted Bihar sugar scene is also due to the poor varietal composition of cane.

This farm infirmity has seen to it that farmers are condemned to low productivity and factories to poor rate of sugar recovery. In this context, it is not surprising that many farmers have opted out of growing cane and land under the crop has shrunk to 110-120 lakh hectares, constituting a negligible percentage of the national cane area of about 4.4 million hectares.

Industry officials complain that in a long time, Pusa Research Institute has not released any new variety of high sugar-yielding cane suitable for Bihar.

But now there is the silver lining in that the government has agreed to build a sugar research institute at Kumarbagh in West Champaran district.

The mandate for the institute will be to develop cane strains, which respond well to the Bihar agro-climatic condition.

After Jharkhand was carved out, the only industry worth the name that Bihar is left with is sugar, no matter how much truncation it has gone through over the years.

Whatever the state of the industry at this point, the potential for expanding cane area, particularly in north Bihar, which offers the ideal agro-climatic condition for this cash crop, is high.

Those who have stuck to Bihar like the K K Birla group and Riga Sugar through all the trying years and the ones like Bajaj Hindusthan, Rajshree Sugar and Dhampur which are looking at the eastern state for building new factories make it clear that for Bihar to regain its rightful place in the country?s sugar industry, the Nitish Kumar government will first have to address the infrastructure and law and order issues.

The administration has no hesitation in admitting to the pitiable condition of village roads interfering with the movement of cane from field to factory as also the inadequacy of irrigation and the poor flood management system.

An industry official bemoaned that the poor road connectivity between farmland and factories and high cost of transportation have been a disincentive to growing cane. Importance of pucca road is underpinned by the fact that more the time taken to transfer cane to factories on harvesting, poorer will be the recovery of sugar.

The new administration leaves no one in doubt that it is keen to grow the sugar industry. This will be possible if farmers see merits in committing more land to cane.

In this context, the administration will do well to consider the suggestion that since quite a sizeable portion of funds earmarked for village road development remains unspent, the development council attached to each sugar factory and headed by district magistrates should be allowed to use at least 75 per cent of the total budget for building of roads and bridges in factory reserved areas.

For the cane crop to be healthy, the growing field needs to be irrigated five to six times between March and the onset of the monsoon.

But this is possible if only annual maintenance work of canal is completed by February and both state and privately owned tube-wells could be run with power from the grid. Bihar at this point is nowhere near the ideal situation.

Floods regularly visit north Bihar during the monsoon, thanks largely to unannounced release of water by Nepal. The high levels of silting of Bagmati, Buri, Gandak and Manusmara rivers and the absence of a drainage system have compounded the problem. Cane farmers pay dearly as their lands remain submerged for days.

?Get the rivers dredged and prevail upon New Delhi to open a dialogue with Kathmandu for flood control,? said an industry official.

The good thing is that there is no doubting the earnestness of the chief minister in turning over a new leaf. That the sugar industry promotion package for building of new factories with minimum daily cane crushing capacity of 5,000 tonne and expansion of the existing mills to 5,000 tonne and beyond has caught the fancy of investors is evident from the fact that the government has so far received as many 36 investment proposals.

In the framing of investment package, the government has seen to it that it is not accused of favouring only the large sugar entities as it befell the Uttar Pradesh government.

One assurance that the investors will need is the allocation of sufficiently large reserved cane area, which is not to be tinkered with in the future.

While this will allow new factories to stay in crushing for nearly six months in a year, they will have the incentive to do comprehensive extension work so that enough cane will be available on factory capacity expansion.
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