Introduction

The sugar industry is the second largest industry in India, next to cotton textiles, playing an important role for Indias economic development. The sugarcane crop and its processing provide employment to about 36 million skilled and unskilled workers. Besides, a large number are employed in the sugar trade and in the transport of sugarcane and sugar. Some of the by products of the sugar industry are the raw materials for other industries such as alcohol, plastics, paper etc. the extension of sugarcane cultivation for the modern sugar industry has contributed to the socio-economic development of many rural areas and a sharp improvement to the well being of the local people. Further the industry contributes an estimated Rs. 1600 crores annually to the central & state exchequers. India has emerged as he largest sugar consumer as well the producer in the world.

Industry Dynamics
Historically, sugar has been a politically sensitive industry and government policy rather than economics have driven its performance and direction. Erratic production trends and the fact that sugar is an essential commodity with a significant rural population associated with its production resulted in the industry becoming a target of excessive government regulation. These controls cover issues of raw material sourcing, pricing, distribution and foreign trade. Until recently, the government decided entry into the industry and capacities as well, but de licensed the industry on August31, 1998. a dual price mechanism currently exists under which companies surrender 40 per cent of their output (levy sugar) to the government at subsidized prices for sale through its public distribution system (the levy Price is currently Rs 11.4 / KG). Companies are free to dispose the remaining 60 percent (free sale sugar) t prices determined by the market. Release of free sale sugar into the market is also regulated by the government. Cane availability for sugar production is limited by its diversion for production of crude sweeteners, gur, and khanndsari, which are important food items in rural India. Indian sugar output is cyclical slack years followed by boom years. The duration of both, slack and boom periods, has varied from between one and four years. Sugarcane competes with various crops like wheat, paddy, and oilseeds and pulses in most cane growing states. Sugarcane output typically reacts to the minimum support prices (the minimum price at which state agencies will lift all the farm output) announced before the sowing season by the government for cane and other crops. High support prices announced by central and state governments causes acreage to shift away from other crops to cane and vice versa. Cane arrears (dues outstanding to farmers for cane purchased by mills) are another important influence on sugarcane output. Large arrears result in decline in cane production in subsequent years leading to poor sugar production and higher price realization for mills. This cycle has been played cut several times in the past.

Sugar Command Area (3.9 MN. Hectares) Sugar Cane (17.1 Mt./Hectors)

45% Sugar(10.3%)

45% Gur, Khandsari (6%)

10% Seeds, Feedstock & Others

Bagasse (30%) Paper, Power

Molasses (4%) Bagasse (30%) Alcohol Paper, Power

Molasses (6%) Alcohol

By Product of sugar and their Uses Sugar production yields bagasse (fibrous, residue of cane after juice extraction) and molasses (liquid residue after all sugar is recovered) as by-products which can be used for setting up down stream capacities. Begasse can be used as setting up down stream capacities. Bagasse can be used as a fuel to fire boilers to generate steam and further to generate electricity. It can also be used to make particle board or paper. Molasses is used by distilleries to manufacture potable or industrial alcohol that is further used by the liquor of the chemical industry.

Progress of the industry

With the launching of the programmers of planned economic development and enforcement of the industries (development and Regulation) September 1951, a regulated and planned development of the sugar industry received all impetus. The licensing policy of the Government brought about two important changes in the structure of the industry, a large proportion of the capacity licensed after 1952 went to the tropical belt (i.e. Maharashtra, Karnataka, Gujarat, Andhra Pradesh, Tamilenadu, Kerala, etc.) In the earlier Years the development took place mainly in the sub-tropical belt (i.e. UP., Bihar, Madhya Pradesh, Rajasthan, Orissa, Assam and West Bengal). Due to the deliberate policy of the Government encouragement to co-operatives, there has been a significant development of the sugar industry in the co-operative sector. The performance of the industry during the various plans has been remarkable as brought out by facts. The number of sugar mills increased from 139 in 1950-51 to 572 presently (314 in the co-operative sector, 188 in the joint and private sectors and 70 in the public sector). The total production of sugar increased from 11.34 lacs tones in 1950-51 (and 1.5 tonnes in 1931-32) to estimated 185 lacs tones in 2000-01 enabling India to further consolidate its position as the single largest producers of sugar in the world.

ECONOMIC ENVIRONMENT
In September, 1998, the sugar industry was de licensed but it was stipulated that the distance between two sugar factories should be maintained at 15 kms. Progressive deregulation has resulted in the ratio of levy to free sugar to 10:90, as against 40:60 a few years ago. Sugarcane is the main raw material for sugar industry and accounts for 70% of the cost of production of sugar. It is also the major source of income for millions of farmers. The determination of price for sugarcane is, therefore, a matter of critical importance both for the sugar industry and the cane growers. The Central Government fixes a Statutory Minimum Price factory wise, in terms of Clause 3 of the Sugarcane (Control) Order, 1966 in respect of each sugar season. Further, under the Clause 5A of the Sugarcane (Control) Order 1966, the farmer is entitled to an additional payment out of the price realization by the factories. The Central Government before the onset of crushing season declares the SMP. For season 2002-03, 2003-04 and 2004-05, SMP of sugarcane was fixed at Rs. 69.50, 73.00, 74.50 per quintal respectively linked to a base recovery rate of 8.5% with a premium for higher recovery. The U.P. sugar factories have paid Rs. 95/- per quintal for sugar season 2003-04 and are currently paying Rs. 107 per quintal for the sugar season 2004-05, based on the prices announced by the U.P Government, which is also referred to as State Advised Price (SAP). Further the Bihar sugar factories paid SMP for the sugar season 2003-04. However most of the Bihar sugar factories have paid a contractual price of Rs. 95/- per quintal, higher than the SMP, for the current sugar season 2004-05. For the sugar seasons 2003-04 and 2004-05, the U.P State Government has granted a total relief of Rs. 2.50 per quintal of sugarcane in form of Cane Purchase Tax and Society Commission, which is directly passed to the cane growers by including the same as part of the total SAP paid as mentioned above. There was a consecutive increase in the production of sugar from 182 lakh tonnes in 1999-2000 to 201.40 lac tonnes in 2002- 03, which was the highest ever production of sugar in a season in the country. Surplus production coupled with carry forward stocks led to depressed sugar prices. Depressed sugar prices, impacted the sugar mills performance which in turn led to accumulation of arrears of cane payment by the mills to the farmers. A combination of these factors and adverse climatic conditions in some of the major sugar producing states, particularly Maharastra, Tamilnadu and 5

Karnataka, led to a significant reduction in sugarcane output and consequently sugar production in the sugar season 2003-04 declined substantially to 139.95 lac tonnes. This trend continued for the sugar season 2004-05 where sugar production is estimated to further drop to 120 lac tonnes. (Source: ISMA). The shortfall in production and reduction in carry forward stocks has led to firming up of sugar prices and positively impacted most sugar mills performances. In 2003-04, domestic consumption was placed at 172.85 lac tonnes while exports were negligible at 2.2 lac tonnes. Estimated consumption for 2004-05 is 175 lac tonnes. Sugar imports for 2003-04 were 4.0 lac tonnes and are expected to be about 20 lac tonnes for 2004-05, thereby compensating for the shortfall in production. Industry ex-factory free sale sugar realizations (net of excise duty) are as follows: Year (Sugar Season) Average Price (Rs/Quintal) 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 Source: ISMA 1320 1338 1316 1268 1119 1232

The government earlier made it mandatory for the domestic oil refineries w.e.f. 1st October, 2003, the blending of fuel petrol with 5% of ethanol in nine states and 4 union territories. However due to non-availability of alcohol, on account of lower production of molasses (sugar), the Government has made the blending program, currently optional. Further the U P Government has made it mandatory to sell 20% of molasses produced to country liquor distillers in the State.

Indias Sugar Production

India has been known as the original home of the sugar and sugarcane. Indian mythology supports the above fact as it contains legend showing the origin of sugarcane. India is the second largest producer of sugarcane next to Brazil. Presently, about 4 million hectares of land is crude sugarcane with all average yields of 70 tonnes per hectare. India is the single largest producer of sugar including traditional cane sugar, khandsari and gur equivalent to 26 million tonnes raw value followed by Brazil in the second place at 18.5 million tonnes. Even in respect of white crystal sugar, India has ranked No.1 position in 7 out of last 10 years. During 1998-99, India produced 155 lac tonnes white sugar while Brazil in 1st place produced 18.5 million tonnes. PRODUCTION OF SUGAR IN INDIA: 1985-86 TO 1999-2000 Year 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 TOTAL Sugar Peoduction 70.16 85.01 91.10 87.52 109.88 120.45 134.04 106.09 98.33 146.43 164.51 129.05 128.52 155.40 182.00(E) 1808.49 Meaningful Production 14.85 6.09 -3.50 22.36 10.57 13.59 -27.45 -7.76 40.34 18.08 -35.46 -0.53 26.88 26.6 Annual growth rate 17.46 6.68 -4.09 20.34 8.77 10.13 -26.3 -7.89 32.8 10.9 -27.11 -0.4 17.29 14.6

Gur and khansari are consumed mostly by the rural population in India. In the early 1930s nearly 2/3rd of sugarcane production was cultivate for production of alternate sweetness gur & khandsari. With better standard of leveling and has shifted to white sugar. Currently about 1/3rd of sugarcane production is utilized by the gur and khandsari

sectors. Being in the small scale sector, these two sectors are completely free from controls and taxes which are applicable to the sugar sector. The sugar production of India has of fluctuated over the year showing a distinct cyclical trend. The annual growth rate of sugar production has not been smooth. The forth powered committee, which examined this matter in depth, recommended liberalization of the sugar sector for ensuring steady and stable growth in production. The meaningful sugar production with the year of 1996-97 itself has gone up 14.85 lakhs in the same of 17.46 percent production was increased it is noted that the immediate subsequent year the managerial production and annual growth rate that been declined 6.09 lakh (6.68 percent) respectively. After the liberalized economic system introduced the impact of sugar production has not significantly increased. The annual growth rare of sugar has always fluctuated all the analyzed period. It is realized that the pricing sugarcane is concerned, it is affected by a number of factors, the most important being the statutory minimum price (SMP) and the state advised price (SAP) these SAP price for sugar can be fixed by the central government on the basis of the cost of sugarcane production. It is found that, if the decontrol system of sugar is adopted this fluctuation situation can be regulated and the production could be improved further. Production and consumption of sugar were more than 13 metric tonnes. The same situation of consumption deficit followed up to 1988-89. in the next subsequent year the sugar production came up to 109.88 metric tonnes of share consumption was less than the production. Within this one year itself, the production raised 22.36 metric tonnes of sugar. The consumption growth has not been from rapidly like population once again the production has come down than the consumption rate. It is realized that the sugarcane production, pricing in the market and motivation given by government is not sufficient. During 1993-94 itself the sugar production has gown down to just 98.33 metric tonnes where we produced more or less equal in the year 1987-88. it is noted that sugar production ha tremendously gone up to 146.43 tonnes when the consumption of sugar was also in their control. Up to the end of analyzed period, so far the Sugar consumption has been maintaining within the sugar production.

CONSUMPTION & GROWTH OF INDIAS SUGAR (1985-2000) Year 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 Sugar Consumption Meaningful MT 87.78 93.33 83.53 99.19 102.83 107.15 112.25 120.05 111.29 119.74 131.27 138.66 148.39 156.35 154.19(E) Consumption 4.22 5.8 5.86 3.64 4.62 5.1 7.8 -8.76 8.45 11.53 7.39 9.73 7.96 -2.16 Annual Growth (%) 4.80 5.97 5.90 3.53 4.03 4.54 6.66 7.87 7.05 8.78 5.32 6.55 1.30 2.49

The percentage share of sugar consumption was 0.83 and subsequently it has been continuing at the same level and reached -0.88. But during the period of 1989-90 onwards the sugar production was in somewhat better. The production and consumption ratio significantly increased. The results show that the during the period of 1989-90, if 1 unit change in consumption there was additionally 1.06 unit sugar produced. Once again the subsequent period 1992-95 the sugar consumption ratio was -0.88. The sugar production is totally dependent upon (except gur and khandsari) sugarcane production. The government should continue with the practice of announcing SMP as a guarantee of minimum price to growers. So automatically, the sugar consumption rate could be controlled.

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INDIAS FIVE YEAR PLANNING FOR SUGAR With the advent of modern sugar processing industry in India in 1930, the number of sugar mills increased from 30 in 1930-31 to 135 in 1935-36. sugar production during the period increased from 1.20 lakh tonnes to 9.34 lakh tonnes, thanks to the expanding role of the private sector. The era of planning for sugar began in 1950-51. In the first Five-year plan, the number of sugar mills stood at 144 and the production of sugar at 17.77 lakh tonnes. The second plan witnessed a record production of 30.29 lakh tonnes with an installed capacity of 24.47 lakh tonnes. The performance of the sugar industry during the Third plan had considerably improved by then. The number of sugar mills with an installed capacity of 32.3 lakh tonnes stood at 200. in the fourth plan, the installed capacity of sugar mills increased sharply and stood at 43.1 lakh tonnes, with 229 mills in operations. In fifth plan period, there was no change in the number of sugar mills, but the installed capacity of the sugar mills had increased to 59.1 lakh owing to the efforts taken by the Task force for sugar mills set up by the planning commission. In the sixth plan period, the total number of sugar mills stood at 339, with an installed capacity of 72.7 lakh tonnes as against 377 mills with an installed capacity of 98.5 lakh tonnes in the seventh plan period. The performance of sugar mills in the eighth plan was remarkable. Both the total number of mills and the installed capacity started increasing and stood at 415 and 127.6 lakh tonnes respectively. In the ninth plan, the centre delicensed the sugar sector, in 1998. as a result, entrepreneurs were allowed to set up sugar mills without a license but at a distance of 15 km from an existing sugar mill. Sugar industries are now enjoying the privilege of expanding their installed capacity and also launching higher capacity new units.

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The Indian sugar industry has achieved a number of millstones. The total numbers sugar industries established in 2003-04 was 461 at a capital investment of Rs. 50,000 crores. The annual turnover of these mills stood at Rs. 25,000 crores, and they provided employment to rural education population of five lakhs. Around 7.5 per cent of rural population, namely, 45 million farmers / rural families are involved in sugarcane moved further up to 201 lakh tonnes in 2002-03. The share of India in he world sugar production was 17.15 per cent in 1991-92. The share declined to 13.20 per cent in 1993-94, the lowest so far, only to increase to 18.57 per cent in 2000-01, which was the highest. At the same time, sugar consumption also increased from 107.14 lakh tonnes in 1990-91 to 160.77 lakh tonnes in 2000-01 and further to 182.03 lakh tonnes in 2002-03.

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EXPORT India emerged as an important exporter of sugar from 1983-84 onwards. Export of sugar n 1983-84 was 2.84 lakh tonnes, earning a foreign exchange of Rs. 70 crores. Exports shot to 12.87 lakh tonnes in 2000-01 and to 17 lakh tonnes in 2002-03. This tremendous increase in exports yielded higher exchange earning. The exchange earning by Indian sugar Export Corporation at Rs. 42.70 crores in 1999 increased to Rs. 112.78 crores in 2000-01.

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International trends in sugar production cost

Although the world average production cost tends to exceed prices, they have mirrored a downward trend in world sugar prices; costs tend to exceed prices because many producers benefit from government protection enabling them to survive despite the fact that their cost exceeds world price levels. The following diagram reveals the long run trend in world raw sugar prices and real world sugarcane production costs. This trend clearly poses a serious challenge to sugar producers around the world. While changes in producers share of world sugar output have an impact on the world average cost of production, the magnitude of this impact is determined in par by how far below or above the world average costs are in India with an increasing contribution to global sugarcane output and with cost around 15% below the world has an impact on the world average cost. A comparison of field cost across a rage of sugar production countries suggests that the average indexed field cost in the countries and the regions over the five year period 1990-95, India has succeeded in steadily lowering its field cost relative to world average field cost.

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COUNTRY WISE PRODUCTION OF SUGAR 1996-97 TO 2000-01

Country India Brazil USA Chine, PR Mexico Thailand Germany France Australia Cuba Turkey Pakistan South Africa Colombia Poland Others World(total) 96-97 14.09 (11.33) 14.64 (11.39) 6.59 (5.30) 7.39 (5.94) 4.84 (3.89) 6.10 (4.90) 4.57 (3.67) 4.59 (3.69) 6.01 (4.83) 4.32 (3.47) 1.79 (1.44) 2.60 (2.09) 2.48 (1.99) 2.13 (1.41) 2.44 (1.9) 39.73 (31.9) 124.26 (100) 97-98 13.92 (10.83) 18.04 (14.03) 7.18 (5.58) 8.74 (6.80) 5.49 (4.27) 4.33 (3.36) 4.40 (3.42) 5.13 (3.99) 5.82 (4.52) 3.28 (2.55) 2.59 (2.007) 3.76 (3.003) 2.66 (2.074) 2.12 (1.65) 2.29 (1.78) 38.65 (30.07) 128.50 (100) 98-99 16.86 (12.51) 21.40 (15.88) 7.53 (5.59) 9.71 (7.20) 4.99 (3.70) 5.48 (4.06) 4.38 (3.25) 4.64 (3.44) 4.74 (3.51) 3.85 (2.85) 2.95 (2.19) 3.85 (2.85) 2.72 (2.01) 2.23 (1.65) 2.24 (1.66) 37.15 (27.58) 134.69 (100) 99-00 19.80 (14.75) 18.19 (13.55) 8.21 (6.118) 7.42 (5.529) 498 (3.7) 5.83 (4.344) 4.79 (3.567) 4392 (3.666) 5.10 (3.8) 4.12 (3.07) 2.44 (1.818) 2.67 (1.967) 2.741 (2.016) 2.65 (1.751) 1.95 (1.453) 38.75 (2.716) 134.19 (100) 00-01 20.11 (15.411) 16.76 (12.843) 7.98 (6.119) 6.74 (5.168) 5.23 (4.01) 5.22 (4.003) 4.75 (3.642) 4.69 (3.596) 4.56 (3.496) 3.61 (2.768) 2.69 (2.062) 2.72 (2.085) 2.61 (2.001) 2.256 (1.730) 2.18 (1.671) 39.30 (29.37) 130.49 (100)

The world total sugar production during 1996-97 was 124.26 million metric tonnes, the share of India itself being 11.33 percent related to Brazil as No. one manufactures of sugar in the world, followed by India. Subsequent year the production market share of India has been downward of (10.83 percent) itself where as the Brazilian

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production nominated of 14.03 percent. It is to be noted that the Indian sugar production has tremendously gone up at the share rate of 12.57 percent second to Brazilian. Chinese also produced enormous sugar on the same year at 7.20 percent at 1998-99. The even of India recently set up a high powered, Mahajan Committee to study the development and growth of the sugar industry in India. It is impressed that the Indias sugar production has gown up 20.11 million metric tonnes. The market share of production was 15.411 percent during 2000.01. the Brazilian market share of production has been down ward of just 12.843 per cent followed by Indias production.

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The international scene

The global sugar production in 2003-04 is estimated at 141.1 million tons, nearly five percent short of the previous level. This is largely due to lower output in India and china. The world sugar consumption on the other hand is projected to rise in 2004-05 by some three percent to reach 143.1 million tons. It is also projected the consumption of sugar among the developing countries will increase by about 9 percent by 2015 and further by about 8 percent by 2030. The developed countries on the other hand will see a minor decline of about two percent by 2015 and further 1.2 percent by 2030. Asia can become a major player in the world sugar sector over the next 15 years as the consumption is growing at the fastest rate in the world. In 2000, while the total consumption in South Asia stood at 26.7 million tons, it is projected to 80 up to 29.5 million by 2015 and further to 32.2 million tons in 2030. The sugar production in developing countries in 2003-04 is estimated at 99.5 million tons, about five percent lower than in 2002-03. The bulk of the shortfall is accounted for by lower output in India and china. The sugar output in china is projected to decline by nine percent to 10.2 million tons due to low prices and adverse weather in some cane growing areas. The revised estimate for sugar output in Brazil for the 2003-04 season is 27 million tons, some 15 percent more than 2002-03 level. The sugar output in developed countries is estimated to decline by three percent in 2003-04 to 41.7 million tons. The fall is mainly due to an 8.5 percent fall in sugar output in European Union following a reduction in sugar beet area. International raw sugar prices have shot up by around 15 percent since the Indian government allowed the import of raw sugar under the advance license scheme in September 2004. Some Indian companies had imported raw sugar at around $230 per ton immediately after the new policy was announced. Current prices in the international markets are around $260 per ton.

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The sugar industry is suffering a loss of Rs. 250-300 per quintal as the cost of production worked out to about Rs. 1500 per quintal against the average selling price of Rs. 1250 per quintal. The sugar industry had promised the centre that cane farmers would be pain on time, if the government provides a package of financial incentive-cheaper credit, export subsidy, ad an artificial price increase by reducing availability of sugar for the common man. However, subsidies have achieved nothing except keeping some competitive units alive. In fact, incentives must help the farmers. If the centre could offer soft loans to the mill owner, a past of the farmers dues could be paid. Experts say that India, like Brazil, should diver some portion of sugarcane for production of ethanol. This will provide the sugar sector additional flexibility to manage the surplus situation. India needs a prospective ethanol policy to encourage large scale production of ethanol for use as a mixed motor fuel.

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Industry Technical Things

PRODUCTION PROCESS Production process for sugar and industrial alcohol/ethanol: Harvested cane is received at the mill gate. Cane is then weighed on the platform type weighbridges having the weight recording arrangement with linkage to the computers for recording the gross and net weights as also the price payable to the farmers. Unloading of Cane is done as follows: Cane received in Cart is unloaded directly into the cane carrier; and Canes received in tractor trolleys and truck is unloaded with the help of overhead traveling cranes. The sugarcane is uniformly fed to the shredder to prepare the same for efficient milling. The prepared cane will then pass through the milling tandems for the initial grinding. The juice extracted is strained and kush-kush separated from the juice is returned to the mill tandem. Bagasse from the last mill is conveyed, by means of a carrier system, as fuel to the boilers. Crushed juice from the milling plant is mechanically screened. Double sulphitation process is followed for the manufacture of sugar in the factory. The juice is then sent for heating up to 70 degree centigrade in rapid flow vertical juice heater. The heated juice is limed and sulphited in a continuous juice sulphiter. The treated juice is then heated to approximately 105 degree centigrade and made to enter a flash tank for the removal of gas and air before letting it into a continuous clarifier, where the settling of the mud flock takes place. Accumulated mud is separately withdrawn by gravity flow. Clear juice is withdrawn from the upper regions through the overflow box for further treatment. Clarified juice from the clarifier is further heated to around 115 degree centigrade in a tubular heater, before being pumped for thickening. Vapors from the 1st & 2nd effect are used to heat the pans. A quadruple effect evaporator is used to effect final thickening

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of the juice into syrup. The syrup of approximately 60/62 brix is further bleached by passing it through a continuous syrup sulphitation vessel and pumped to pan supply tanks at the pan floor. A three and half boiling system with the use of true seeding method is used in the pans for complete exhaustion. The process of crystallization is initiated in the pans, and is completed in the crystallizers. Air-cooled crystallizers are used to handle proper crystallization. After the mother liquor in the massecuite is exhausted to the optimum limit i.e. the maximum sugar from the mother liquor has been transferred to sugar crystals, the two constituents are separated in the centrifugals. The sugar is washed thoroughly with super heated wash in stages within the centrifugal baskets. The sugar discharged from centrifugals is conveyed, dried and cooled by fluidized bed hoppers. Sugar is screened in a grader so as to separate fine and lumps. Sugar is thereafter filled in sacks, weighted, stitched and transferred to the sugar warehouse. Molasses and Bagasse are by products of the sugar plant. Besides, the unit also produces steam, which is used to generate power for captive consumption. The recovery of sugar from sugarcane range 9% to 11% during the last four years and the total reducing sugar in molasses has been around 40%. Molasses is diluted and fermented with yeast. The Fermented diluted molasses called wash is distilled in the distillation columns to produce Rectified Spirit (Industrial Alcohol). Rectified spirit is fed to the absolute alcohol plant whereby water present in rectified spirit is removed to get 99.5% -99.8% pure alcohols called absolute alcohol (Ethanol).

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Sugarcane Pricing
Sugarcane is the main raw material for sugar industry and accounts for about 70% of the cost of production of sugar. It is also the major source of income for millions of farmers. The determination of price for sugarcane is, therefore, a matter of critical importance both for the sugar industry and the cane growers. The Central Government fixes a Statutory Minimum Price factory wise, in terms of Clause 3 of the Sugarcane (Control) Order, 1966 in respect of each sugar season having regard to the following: Cost of production of sugarcane Return to the growers from alternative crops and the general trend of prices of agricultural commodities Availability of sugar to consumers at a fair price Price at which sugar produced from sugarcane is sold by sugar producers Recovery of sugar from sugarcane Further, under the Clause 5A of the Sugarcane (Control) Order, 1966, the farmer is entitled to an additional payment out of the price realization by the factories. The Central Government before the onset of crushing season declares the SMP. For season 2002-03, 2003-04 and 2004-05, SMP of sugarcane was fixed at Rs. 69.50, 73.00, 74.50 per quintal respectively linked to a base recovery rate of 8.5% with a premium for higher recovery. The U.P. sugar factories have paid Rs. 95/- per quintal for sugar season 200304 and are currently paying Rs. 107/- per quintal for the sugar season 2004-05, based on the prices announced by the U.P Government, which is also referred to as State Advised Price (SAP). Further the Bihar sugar factories paid SMP for the sugar season 2003-04. However most of the Bihar sugar factories have paid a contractual price of Rs. 95/- per quintal, higher than the SMP, for the current sugar season 2004-05. For the sugar seasons 2003-04 and 2004-05, the U.P State government has granted a total relief of Rs. 2.50 per quintal of sugarcane in form of Cane Purchase Tax and Society Commission, which is directly passed to the cane growers by including the same as part of the total SAP paid as mentioned above.

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In a Landmark judgment, the Honorable Supreme Court in its 3:2 majority judgments, dated 5th May 2004 has upheld the right of U.P. State Government to fix the State Advised Price (SAP) of sugarcane at levels higher than the SMP prescribed by the Central Government under the Sugar Cane (Control) Order, 1966, thereby setting aside the order of the Allahabad High Court which had held SAP to be untenable. As regards other States, like Bihar, Punjab, Haryana, the orders of the respective High Courts have been set aside and the writ petitions have been remitted back to the respective High Courts for fresh consideration in accordance with the applicable laws of those states. The U.P. Industry, subsequently filed the review petition, but the same was also dismissed. After the judgment of the Supreme Court, the U.P. State Government has announced SAP for the sugar season 2003-04, with retrospective effect. The same was challenged by the U.P. Sugar Mills Association, before Allahabad High Court and the Court has upheld the prices announced by the U.P. Government. As a result, U.P. Sugar Mills have made a payment towards the arrears on account of differential prices of cane for the seasons 1996-97 and 2003-04. Release Mechanism of Sugar Under the partial control of sugar industry followed by the Central Government, 90% of the sugar produced by sugar mills may be disposed off by them, without any restriction on price and movement. The balance 10% is to be supplied by them at prices fixed by the Central Government. However, both free sale sugar and levy sugar are subject to monthly quotas decided by the Central Government. The sugar produced in 4 to 5 months in a sugar seasons is controlled and regulated to be sold throughout the year. This release mechanism has been in place since 1942, when the Sugar and Sugar Products Control Order was first promulgated and has since been followed except for a break during 1978-79, when monthly release was given up. The reason for monthly release of sugar has been to ensure that sugar is available throughout the year at reasonable prices to consumers, while at the same time maintaining the price at a steady level helps the industry. 10% of the sugar produced by the factory is procured by the Government as levy sugar at a pre-determined price for supply to consumers through the Public Distribution System. This proportion of levy sugar was 60% in 1967-68 and has been gradually brought down to 10% from 2001-02.

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ORGANIZATIONS OF THE STUDY 1. THE OUDH SUGAR MILLS LTD The OUDH sugar mills Ltd. was promoted by Late R.D.Birla in 1932 with the main object of carrying on business of production and sales of sugar and sugar related products. The first sugar mill of the Company was set up at Hargaon (District Sitapur, Uttar Pradesh) with a crushing capacity of 400 tcd. The company further established a distillery at Hargaon in 1945. Subsequently, company purchased a sugar factory namely Rosa Sugar Works at Rosa (District Shahajahanpur, Uttar Pradesh) in 1976 with a crushing capacity of 1000 tcd. In 1984, The New Swadeshi Sugar Mills Limited having a sugar mill, distillery at Narkatiaganj (District West Champaran, Bihar), a fruits and vegetable canning factory at Allahabad and a paint factory under lease at Calcutta was merged with the Company. The lease of the paint factory was terminated in April, 1997. Over the period the company has expanded capacities of sugar production, industrial alcohol/ethanol and canning products. Presently, the company has three sugar factories at Hargaon, Rosa in Uttar Pradesh and at Narkatiaganj in Bihar with a combined crushing capacity of 15,000 tcd. The Company is also having two distilleries at Hargaon and at Narkatiaganj with a total capacity 20.53 million liters per annum. The Oudh sugar mills Ltd.s fruits and vegetable canning factory is situated at Bamrauli near Allahabad in Uttar Pradesh. The company manufactures the following three main categories of products: Sugar Industrial Alcohol/Ethanol Canning Products. In addition, the company also has arrangement for manufacturing of Bio-compost at Hargaon by using Press-Mud from sugar factory and spent wash from distillery. Biocompositing culture purchased from Vasant Dada Sugar Institute, Pune are added and by Aerobic Bio-composting process in 45-60 days, Bio-compost is ready. This is a fertilizer having Nitrogen, Phosphorus and Potash etc. and widely used in cane, wheat, vegetables

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& flowers cultivation. Bio-compost produced by the company is marketed under the brand name Oudh Jaivik Khad. Corporate Structure Management of the Company vests with the Board of Directors comprising industrialists, professionals and persons having industrial experience and business acumen. Majority of the directors on the Board are independent. The Chairman -cumManaging Director of the Company is overall in charge of the Company. He is assisted by a team of Executive Presidents of various units of Company and the Vice-Presidents to manage the day to day affairs of the Company. Main Objects Of The Company The main objects as set out in the Memorandum of Association of The Oudh Sugar Mills Limited are as under: To purchase, manufacture, produce, refine, prepare, import, export, sell and generally to deal in sugar, sugar-beets, sugarcane, molasses, syrups and melada and alcohol and all products or by-products thereof and food products generally and in connection therewith to acquire, construct and operate sugar or other refineries, buildings, mills, factories, distilleries and other works. To plant, cultivate, produce and raise or purchase sugarcane, maize, sugar beets and other crops and to transact such other work or business as may be proper or necessary in connection with the above objects or any of them. The Objects Clause of the Memorandum of Association of our Company enables us to undertake our existing activities. Mission Of The Company The Oudh Sugar Mills Limited is amongst the most efficient sugar companies in sugar industry. As a Company we strive to i) Excel in our core areas of competence i.e., manufacture of sugar and allied

products;

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ii)

Uphold and nurture the core values of Good Corporate Governance, i.e.

transparency, empowerment, accountability, independent monitoring and environmental consciousness; iii) iv) v) Fulfill the aspirations of customers, employees, financers and of the society in Provide every opportunity for employees and business associates to realize their Maximize shareholders' wealth through value addition by integration and general; potential to the fullest; expansion. PRODUCTS Sugar Sugar is produced at the Hargaon Sugar Mills and Rosa Sugar Works both situated in the State of Uttar Pradesh and at New Swadeshi Sugar Mills situated in the State of Bihar having crushing capacity of 6500, 4000 and 6500 tonnes of sugarcane per day respectively. The sugar factories are equipped with the state of the art technology to produce pure crystal cane sugar of the highest purity. Molasses Molasses is a by product generated in the process of manufacture of sugar. It can either be sold untreated or be used as principal feedstock for manufacture of alcohol. The molasses generated in the Companys sugar factories at Hargaon and Narkatiaganj is used as raw material in its distilleries for production of Industrial Alcohol/Ethanol. Bagasse Bagasse is a by product generated in the process of manufacture of sugar. It can either be sold or be captively consumed for generation of steam. The bagasse produced in the Sugar Factories is used for generation of steam.

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Industrial Alcohol The Company has installed Distilleries at Hargaon and Narkatiaganj with a capacity to produce 11.53 million litres and 9 million litres of industrial alcohol/ethanol per annum respectively. Ethanol One of the most remunerative applications of molasses is in the manufacture of ethanol, an environment friendly fuel. Being an oxygenate it contains high percentage of oxygen which helps combust fuel more completely and reduces vehicular injurious emission. The Government has made blending of fuel petrol with 5% ethanol mandatory with effect from 1st October, 2003 in nine states and four union territories. To meet the increasing demand of ethanol, the Company's Distillery at Hargaon installed ethanol producing plant to convert Rectified Spirit into Ethanol of a capacity of 30 klpd. Organic Fertilizer Spent wash, an effluent generated from processed molasses is used with pressed mud for the production of organic fertilizer. The Company has installed a Bio Compost Plant at Hargaon to produce organic fertilizer which is marketed under the brand name "Oudh Shakti Jaivik Khad". Canning Factory The Company has a Canning factory at Bamrauli near Allahabad and markets its processed food products under the brand name MORTON.

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MARKETING Sugar At present, 10% of the sugar produced is released by the Central Government for its nominees as levy sugar and the remaining 90% is sold in the open market. However, the Government through the release mechanism system controls the actual quantity that can be sold in the open market. The price of sugar sold in the open market depends on market forces. The free sugar is sold through a network of agents, who in turn sell to wholesalers. As per the Companys practice, the delivery of free sale sugar is generally made against advance payment through demand draft on ex-factory basis. Besides U.P., our Company sells sugar in Haryana, Madhya Pradesh, Bihar, Jharkhand, West Bengal & Assam. Export Obligation Company has purchased on high sea sale basis 7500 MT Imported Raw Sugar of Brazil origin via Kandla port in terms of the Advance Licence under Duty Exemption Scheme issued by Jt. Director General of Foreign Trade, Mumbai on the condition that the Company is required to export 7143 MT of white sugar within a period of 24 months from the date of the issue of the Advance License dated 11.11.2004. The said quantity is being processed at our Hargaon and Rosa units. The total amount of duty exemption is Rs. 493.12 lacs. In the event of non-fulfillment/part-fulfillment of the required export obligation within the stipulated period, we may be required to pay the duty in proportion to the non-fulfilled export obligation.

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2. BALRAMPUR CHINI MILLS LTD Balrampur Chini Mills Ltd. is one of the largest integrated sugar manufacturing companies in India. The allied business of the company also consists of manufacturing and marketing of Alcohol, Organic Manure and generation of Power. The company has five sugar factories located in Eastern Uttar Pradesh (India) having an aggregate sugarcane crushing capacity of 40,000 tones crushed per day. Akbarpur sugar factory would begin production in the month of November, 2005. The company has acquired Rauzangaon sugar unit from the Dhampur Sugar Mills Ltd. The unit has 7500 TCD crushing capacity and 12MW of cogeneration power facility. The acquisition is subject to FII's/Banks approval from the Dhampur Sugar Mills Ltd. Another Greenfield project consisting of 7000 TCD sugar plant and 24MW of saleable cogeneration power facility is under implementation at Mankpur in Eastern Uttar Pradesh (India) As A Company Will Strive To: a) Stick to use competence of manufacturing sugar and allied products. b) Incorporate the principles of corporate governance to maximize the delivery of shareholder value. c) Ensure that the development of the community in which it is based in context with business growth. d) Recruit & retain skilled and superior expertise, measure and reward superior performance. Company maximizes the shareholders value by achieving consistent, superior performance, producing the finest quality of sugar, ensuring the welfare of company people and ensuring adequate community development."

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Balrampur will strive to retain its place as one of India's premier sugar companies through sustained expansion of its sugar manufacturing operations - an area where they hold core competence - at global efficiencies of cost, quality and standards of customer servicing." Profile Balrampur has been a profit making and dividend paying company since its incorporation in 1975. Present equity capital comprises 84% bonus shares.

The Balrampur Brand Balrampur Chini Mills also has packaged brand that you can buy off the super market shelf. However, consumers can buy Balrampur's product by asking for it in the retail markets of some specific cities of the country. The success of Balrampur's brand equity is reflected in its pricing. Companys product moves faster than the other names in the market despite the fact that they price their sugar at a premium to the average market trend.

Sugar Balrampur Chini Mills Ltd. [BCML] is the largest integrated sugar manufacturing company in India having five sugar mills located in Eastern U.P. with an aggregate capacity of 40000 Tons Crushed per Day [TCD]. Unit wise capacities are - Balrampur 12,000 TCD, Babhnan 9,000 TCD, Tulsipur 7,000 TCD and Haidergarh 5,000 TCD and new unit at Akbarpur to commence production from November, 2005. Recently acquired Rauzagoan having capacity of 7500 TCD will also commence operation from November, 2005. Mankapur unit is under implementation will be ready to crush 7000 TCD of sugar cane by the beginning of the next season. (2006-07).

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Power Bagasse, which is generated as a by-product, is currently used as the principal feedstock to generate electricity for captive consumption. The surplus Bagasse is utilized in - 24.55 MW co-generation power plants at Balrampur and 23.25 MW co-generation power plant at Haidergarh. The new project of Akbarpur will also generate 18MW along with Rauzagaon which has a facility of 12MW cogeneration power plant. The surplus electricity generated after meeting the internal requriements is - sold to Uttar Pradesh Power Corporation Ltd. By November, 2006 the cogeneration capacity of the company will be further strengthened through commissioning of 24MW saleable cogeneration plant at Mankapur. Alcohol BCML is also having a distillery of 160 KLPD capacity attached with its Balrampur and Babhnan unit for value addition of its by product molasses. Another distillery of 60KL is planned to commission by November, 2006 at Mankapur in Eastern Uttar Pradesh. Bio Composed Company has started manufacture of bio fertilizer 'BHUMI SHAKTI' at its Balrampur and Bhabnan unit by using press mud of sugar unit and spent wash of distillery. Bio fertilizer is organic manure. The new Bio fertilizer plant at Mankapur to commence operation in November, 2006 will add further to integrated mechanism being followed by the company. Helping keep the environment clean In a world that is getting increasingly concerned about whether manufacturers working with natural resources are exploiting the environment, it would be worth appreciating that the sugar industry goes one responsible step further: it directly contributes to making the world a cleaner place to live in. This is happening through two principal applications - the production of a clean automotive fuel additive and clean power.

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1. Ethanol, Green Fuel One of the most attractive applications of molasses (sugar byproduct) is in the manufacture of ethanol, an environment friendly fuel. Being an oxygenate, ethanol contains 35 per cent oxygen, helps combust fuel more completely and reduces vehicular tailpipe emissions. Over the last year, the government of India encouraged the blend of ethanol with automotive fuel to the extent of 5 per cent in nine states and four union territories; this is likely to be extended to the entire country following which the blend is expected to be raised to 10 per cent in line with the trend in other countries. This progressive use of ethanol will not only reduce the vehicular pollution load in the environment but also accelerate the company's migration to Euro IV norms. The Balrampur Response The company commissioned a 40 klpd ethanol plant at its Balrampur unit in 2002-03 followed by a 60 klpd ethanol plant at Babhnan in January 2004. The company's entire production of ethanol is secured by way of stable long term contracts with oil majors like IOL, HPCL, BPCL and IBP. 2. Bagasse, Renewable Power Source The use of Bagasse (byproduct) in the co-generation of power represents three attractive propositions: cost saving, income generation and the prudent substitution of fossil fuels with renewable energy sources. Over the last few years, with the onset of power sector reforms the trend towards co-generation has accelerated. This is line with the global preference for renewable energy forms. For instance, the European Union and other developed countries have specified that a percentage of incremental power should come from renewable sources to protect the environment from greenhouse gases, a feature that is reflected in India's Electricity Act 2003.

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The Kyoto Protocol represents an extension of this spirit into practice. It was adopted under the UNO framework of conventional climatic changes designed to reduce greenhouse gas emissions and combat global warming. It would be relevant to indicate that power co-generated from Bagasse represents a renewable energy source and meets all the parameters of the Kyoto Protocol.

The Balrampur Response Balrampur's four co-generation plants -at Balrampur, Haidergarh, Akbarpur and Rauzagoan - possess a combined capacity 77.8 MW. These plants serve the companies complete power requirement at these units, helping it save the differential cost that it would have had to pay for commercial purchase; they also help in generating a steady income in the course of the business. In doing so, they have addressed also the parameters of the Kyoto Protocol. Responsible farmer-miller-consumer partnership model In a world where industry growth is often assumed to be derived at the expense of supply chain partners, it would be worth showcasing the sugar industry as a model of responsible partnership. The sugar industrys farmer-miller-consumer partnership model is marked by a mutual respect for the other's interest, leading to a win-win proposition for all. Farmer: The fact that millers must draw cane only from their respective command areas makes farmer welfare central to a mills existence. Not just this, millers must consume all the cane delivered by the farmers, an attractive insurance for growers against non-sale. Besides, all the cane must be remunerated within 14 days of the delivery of produce. Over the years, the cane price has increased faster than the remuneration derived from other competing crops, independent of the realizations of its end product. This remuneration is not only structured on the basis of the product by weight but is also influenced by the incidence of its sucrose content, leading to a fair and precise estimation

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of the farmer's hard work. Besides, farmers are also entitled to a share in sugar realizations. Miller: The farmer cannot supply cane to a miller other than the one stipulated by the State Government. This ensures a predictable availability of raw material for the miller to base his annual budget and production plan. Since the remuneration is based on a mix of weight and sucrose content, it protects the miller's interest in the event of sub-optimal raw material delivery. Consumer: Sugar is integral to our lives. It constitutes the mainstay of our everyday diet through its visible use in beverages and confectioneries and its invisible use in chewing gums, ice creams, mint, juice, energy beverages, chocolates, chutneys, various packaged foods, ketchup, biscuits and colas, among other products. Sugar is the most reasonably priced core daily food ingredient, reflected in the fact that its annual price appreciation is the lowest compared to other cereals and its retail price in India is among the lowest in the world. As an extension, this low price has created a strong base for sugar's increasing consumption among the lower income sections of society. The Balrampur Response Over the years, Balrampur has remunerated farmers unfailingly within the stipulated period, it has proactively enhanced its production capacity and provided farmers with an incentive to grow more cane and its product quality compares with the best in the country. A neat agricultural-industrial fit In a country where the interests of the agricultural are often seen as contrary to the requirements of the industrial, sugar is unique because it reconciles India's vast agricultural tradition with the needs of modern-day industry. It is the only industry with an agricultural origin (sugarcane) and a consumer (sugar) as well as an industrial (ethanol

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and power) application. This translates into a broad raw material base that will enable it to meet the needs of all its direct and indirect consumers over the foreseeable future. This advantage is derived from the following factors: Vast spread: Cane covers 4.61 million hectares in India. Dispersed presence: Cane is grown in around 16 Indian states. Deep presence: It is grown by 50 million farmers, 12.4 per cent of India's farm labor. Sturdy presence: It possesses an ability to resist extreme variations of temperature and rainfall. Remunerative presence: It enjoys higher-than-competing crop realizations, inspiring increased planting As a result, India's average cane production of 289.63 million tonnes is an attractively large proportion of Indias total average agricultural production. Financial Position Of The Compay Balrampur chini mills Ltd. Has strong financial position reporting Profit After Tax of Rs. 6048 Lakh in 2004 and Rs. 12506 Lakh in 2005. In 2004 Balrampur chini mills Ltd. Was having Net Turnover of Rs. 69937 Lakh in 2004 and Rs. 81332 Lakh in 2005. the company was having 3.16 & 6.16 basic and diluted earning per share of Rs. 1 each for 2004 and 2005 respectively.

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3. BAJAJ HINDUSTAN LTD Bajaj Hindustan ltd. a part of the 'Bajaj Group is India's largest sugar and ethanol manufacturing company headquartered at Mumbai (Maharashtra), India. The company's plants are located in the northern Indian state of Uttar Pradesh (UP), at Golagokarannath and Palia Kalan (district Lakhimpur Kheri), at Kinauni (district Meerut), Thanabhavan and Budhana (district Muzaffarnagar) and at Bilai (district Bijnore). It is also in the process of acquiring the Pratappur Sugar and Industries Limited (PSIL), district Deoria, eastern UP. PSIL is a running Plant with a cane crushing capacity of 3,200 tonnes crushed per day (tcd). There is huge potential of expanding capacities at this Unit as there is a large cultivable area. Currently, the company has the largest sugarcane crushing capacity in India of around 57,000 tcd. It is slated to simultaneously commence three new sugar plants in October 2006 at Saharanpur, Pilibhit and Lakhimpur districts of UP. Aiming for a global positioning, these Greenfield and concurrent Brownfield expansions will increase the company's total cane crushing capacity from the present 57,000 tcd to 100,000 tcd by 2006-07, increasing the company's sugar production to around 2 million tonnes. History Bajaj Hindustan ltd. was incorporated on 23rd November, 1931 by Jamnalal Bajaj and was named The Hindusthan Sugar Mills Limited. Besides being a respected businessman, Jamnalal Bajaj was a confidante and disciple of Mahatma Gandhi. The first site of the company was located at Golagokarannath in Lakhimpur Kheri district in the Terai region of Uttar Pradesh, India, an area rich in sugar cane. The Plant started with a cane crushing capacity of 400 tonnes crushed per day (tcd). Subsequently, the capacity was increased in stages to reach its present level of 13,000 tcd. The distillery Unit at Golagokarannath, set up by the company commenced production during the last years of the War in 1944. During the first few years, the major output was in the form of power alcohol as an additive to petrol, which was then in short supply. In fact, the unit was the first to supply alcohol mixed petrol to the army.

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In 1967, a new company - Sharda Sugar & Industries Limited - was established as a subsidiary of Hindusthan Sugar Mills Limited. A sugar factory with a cane crushing capacity of 1,400 tonnes per day was set up in 1972 at Palia Kalan, a large cane supply center at a distance of about 70 kilometers from Golagokarannath. This was done primarily to help the cane growers of the area to supply their cane. The new factory was closer to their fields and thus cut down on transportation cost. Subsequently, the capacity was increased in stages to reach its present level of 11,000 tcd. In 1988, The Hindusthan Sugar Mills Limited was renamed as Bajaj Hindustan Ltd. and shortly thereafter - in the year 1990 Sharda Sugar & Industries Limited was amalgamated with Bajaj Hindustan Ltd. Today, with its new sugar manufacturing facility at Kinauni, near Meerut, Uttar Pradesh, Bajaj Hindustan has a cane crushing capacity of 31,000 tcd and is also the country's largest ethanol producer with an output of 145 kilo liters per day (kl/d), slated to increase to 305 kl/d by October this year. The company's annual turnover was Rs. 5,430 million with a net profit of Rs. 610 million for the year ended September 30, 2004. The company's current aggressive Greenfield expansion projects started with the plant at Kinauni, which was completed in a record time of just seven months as against the industry norm of 18-24 months, commencing commercial production in November 2004. Three other sugar manufacturing units are scheduled to start operations in October 2005 at Muzaffarnagar and Bijnore (UP). With an investment of around Rs. 6,000 million, these new Plants will increase the company's total sugar production capacity by 528,000 tpa, doubling it to close to 1 million tpa by October this year, consolidating the company's position in the global sugar industry. These expansions are by far amongst the largest to be undertaken simultaneously, worldwide.

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Aiming for a global positioning, the company has already embarked on further Greenfield expansions in Uttar Pradesh scheduled for operations during the crushing season beginning October 2006. Consequently, Bajaj Hindustan will be crushing 95,000 tonnes per day of cane, producing around 2 million tonnes of sugar.

Procurement Of Sugar Every year Bajaj Hindustan ltd. conducts a survey of its command area to bring on record the cane cultivated area of the farmers. This also takes care of the different varieties of sugarcane that are grown by farmers. Post this massive exercise, every farmer within the command area of the mill is provided with a calendar, which tells him when he can expect a Mill Supply Ticket (Purchy) against which he will supply the cane. The calendar is distributed over 180 days. Based on the maturity and recovery expected from the varieties, the distribution takes place in the calendar. After receiving the purchy, the farmer harvests the cane and transports it either in a bullock cart or tractor trolley to the mill gate. Farmers who stay in far flung areas supply cane at the mill's centers. This cane is then transported in trucks or through rail to the mill. Bajaj Hindustan ltd., has a total of 1, 41,155 hectares of cultivable land under their command area. This area covers 1,344 villages and has over 95 centers. It purchases cane from over 1, 13,577 farmers. Assuming a family of 5 per household the economy of over half a million households is dependent on Bajaj Hindustan ltd. Quality Of Sugar At Bajaj Hindustan ltd. Company produce sugar of following grades:L-31, M-31, S-31, L-30, M-30 and S-30 out of which maximum production is of 31 colour sugar. (31 is the best colour standard fixed by the Government of India)

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Sugar grading is done for colour and grain size. Sugar produced is regularly matched with N.S.I. standards Percentage retention of sugar is currently being maintained at 85%+ as against minimum requirement of 70%

Management Objective The Performance Management System in Bajaj Hindustan ltd. aims at: Giving a sense of direction and challenge to the individual and their team through role clarity Helping different functions and departments to go beyond targets and benchmarks and take quantum jumps Creating a supportive and empowering culture in the organization Providing information for annual increments-incentives, promotions, job-rotation, identifying training needs etc. Identify talent for succession planning Identifying employees with long term growth potential Identifying employees performing below expectation and what inputs are required to improve their performance To ensuring growth of employees for organizational perpetuity Creating of Total Quality Environment through enhancing the commitment of people in terms of productivity, quality, technology, structure and systems The mechanism is two - fold. A 360 degree performance feedback is provided to each employee by his supervisors, peers, subordinates, internal and external customers on his attitude towards work, planning/work management, controlling and coordinating, team work and collaboration, supervisory and leadership behavior, change management, strength, weakness, opportunity and threats. It provides insights into the strong and weak areas of 38

the employee in terms of effective performance of roles, activities, styles, traits, qualities, competencies, knowledge, attitude and skills, impact on others and the like. Supervisors, peers, subordinates, internal and external customers of each employee evaluate the achievement level of targets associated with predetermined and mutually agreed upon Key Result Areas. Targets and Key Result Areas are dynamic and are modified each year in response to the organizational challenges. A weightage is attached to each Key Result Area accordingly. This evaluation leads to rating of the employees which has several linkages. E-Sugar An initiative of Bajaj Hindustan ltd., esugarindia.com is India's most comprehensive B2B Portal and Sugar Exchange. Bajaj Hindustan ltd. - through its associate Bajaj Ebiz Private Limited, along with a couple of other investors, have promoted E-sugarindia Limited, primarily with an objective to provide a B2B platform to enable spot and futures trading in sugar. However to ensure neutrality of the trading exchanges, a large buyer/seller base and the participation of the entire sugar industry equity is being offered at par to some of the prominent sugar manufacturers in private, public and co-operative sectors, sugar traders' and merchants' associations and bulk consumers etc. Apart from the sugar mills of Maharashtra who have agreed to pick up 10% equity in E-sugarindia Limited encouraging responses have also been received from U.P. State Sugar Corporation and Co-operative Sugar Factories Federations of U.P., Tamilnadu, Karnataka, Gujarat, Mumbai Sugar Merchants Association and other Industry Participants. esugarindia.com aims at providing timely and accurate information to enable price discovery and transparency in the trade. A platform (exchange) for online trading in sugar on the internet, in both - the Spot (physicals) market as well as the future market. Online payment facilities (as and when permitted). Value added services viz. transportation, insurance, information on plant and machinery, chemicals, packing

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materials, consultancy services etc. An information hub to the sugar industry containing directory of sugar factories, industry news, latest statistics etc. Trading has commenced on the SUGAR PHYSICALS EXCHANGE of esugarindia.com. A large number of manufacturers, brokers, commission agents, traders, and bulk consumers etc., from all across the country have already become members and are conducting online trading. Further, the Central Government has also granted recognition to E-sugarindia, to conduct Futures Trading in sugar for a period of 5 years ending 31st May, 2007. Esugarindia will therefore soon be operating INDIA'S FIRST SUGAR FUTURES EXCHANGE on esugarindia.com. With the Sugar Physicals exchange (spot market) and Sugar Futures Exchange (SFX), both available on a common platform - esugarindia.com, it will offer the participants, tremendous advantage and leverage. E-sugarindia is also the COUNTRY'S FIRST DEMUTUALISED EXCHANGE, wherein the ownership, management, exchange operations and exchange participants (players), are all entirely demutualised (controls vest in separate / independent groups). Mission And Vision Vision To be the leader in chosen business area, create an organization that all constituents are proud to be associated with, set benchmarks that will become the standard for others to emulate and through ethical business practices create wealth for stakeholders of the company. Mission To transform Bajaj Hindustan ltd. into a dynamic and vibrant business entity where growth is an ethos and the long-term value creation for stakeholders is the paramount objective.

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Process of Making Sugar Sugarcane is broadly classified into three varieties early, general and unapproved. Cane is sowed during February and October every year. The first seed growth is known as the plant and subsequent growth after harvesting from the stem is known as Ratoon. The early variety has more sugar content than the general variety. Every farmer within the command area of the Mill is provided with a calendar, which tells him when he can expect a Mill Supply Ticket (Purchy), against which he will deliver the sugarcane. He then harvests the cane and transports it either in a bullock cart or tractor trolley to the mill. Cane is also bought at the mill's own centers within the command area. This cane is then transported in trucks or through rail to the mill. Cane is weighed using an electronic weigh bridge and unloaded into cane carriers. It is then prepared for milling by knives and shredders. Sugarcane juice is then extracted by pressing the prepared cane through mills. Each mill consists of three rollers: Extracted juice mixed with water is weighed and sent to the boiling house for further processing. Residual Bagasse is sent to boilers for use as fuel for steam generation This juice is heated and then treated with milk of lime and sulphur dioxide. The treated juice is then further heated and sent to clarifiers for continuous settling. The settled mud is filtered by vacuum filters and filtered juice is returned to be further processed while the Oliver cake is sent out The clear juice is evaporated to a syrup stage, bleached by sulphur dioxide and then sent to vacuum pans for further concentration and sugar grain formation. Crystals are developed to a desired size and the crystallized mass is then dropped in the crystallizers to exhaust the mother liquor of its sugar as much as possible. This is then centrifuged for separating the crystals from molasses. The molasses is re-boiled for further crystallization

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Thus, the original syrup is desugarised progressively (normally three times) till finally, a viscous liquid is obtained from which sugar can no longer be recovered economically. This liquid, which is called final molasses, is sent to the distillery for making alcohol. The sugar thus is separated from molasses in the centrifuge is dried, bagged (50 Kg and 100 Kg), weighed and sent to storage houses. Sugar is made in different sizes and accordingly classified into various grades i.e. large, medium and small. BY PRODUCT OF SUGAR Molasses: Molasses is the only by-product obtained in the preparation of sugar through repeated crystallization. The yield of molasses per ton of sugarcane varies in the range of 4.5% to 5%. Molasses is mainly used for the manufacture of alcohol, yeast and cattle feed. Alcohol in turn is used to produce ethanol, rectified spirit, potable liquor and downstream value added chemicals such as acetone, acetic acid, butanol, acetic anhydride, MEG etc. The state government controls the export of molasses through export licenses issued every quarter. Molasses and alcohol-based industries were decontrolled in 1993 and are now being controlled by respective state government polices. Nearly 90% of molasses produced is consumed by the industrial alcohol manufacturers and the remaining 10% is consumed by the potable alcohol sector. Bagasse: Bagasse is a fibrous residue of cane stalk that is obtained after crushing and extraction of juice. It consists of water, fiber and relatively small quantities of soluble solids. The composition of bagasse varies based on the variety of sugarcane, maturity of cane, method of harvesting and the efficiency of the sugar mill. Bagasse is usually used as a combustible in furnaces to produce steam, which in turn is used to generate power. It is also used as a raw material for production of paper and as feedstock for cattle.

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By making use of bagasse sugar mills have been successful in reducing dependence on State Electric Boards, for their power supply as it can procure up to 9095% of its total power requirement through captive generation from steam turbines. Fly ash: Fly Ash is the residual output from the boiler furnace after bagasse has completely burnt out. This fly ash is used as a substitute for firewood. It is rich in potassium and is also used by local farmers for cultivation. Press Mud: Press mud, also known as Oliver cake or press cake, is the residual output after the filtration of the juice. It is mixed with spent wash from the distillery and cultivated to produce high quality bio-manure. QUALITY STANDARD The quality of the sugar manufactured at Bajaj Hindustan ltd. is controlled by: Maintaining process parameters strictly e.g. ph of juice, temperature of mixed juice and syrup juice Maintaining good sanitation at mills and in the boiling house Using minimum, tested, good quality chemicals for processes Adopting latest technologies for juice and syrup/melt clarification e.g. film type sulphur burner, SCS, FCS and MCS Avoiding direct steam application to intermediate sugar products Doing experiments and special analysis to ensure optimum ICUMSA of all intermediate products and the final product

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Financial Position Bajaj Hindustan ltd. has reported profit after tax of Rs. 6100 lacs ion 2004. In 2004 Bajaj Hindustan ltd. was having net turnover of Rs. 52520 lacs from which Rs. 49970 lacs was from sugar sales and other from sale of by products. The company was having Rs. 6.99 per share basic and diluted earnings for share of Rs. 1 each. The company has total capital employed of Rs. 43670 lacs as on 31st march 2004. The Company concluded Global Depositary Receipts (GDR) issue of US$ 60 million in May 2005 and allocated 20,833,000 GDR @ US$ 2.88 per GDR, each representing one fully paid Equity Share of Re. 1/- per share at a price of Rs.125/- per share, with the existing paid up Equity Shares - resulting in an increase in the paid up equity share capital from Rs.8.73 crore to Rs.10.82 crore and increase in share premium account by Rs. 258.33 crore.

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4. EID PARRY (INDIA) LIMITED About EDIPARRY Established in the year 1788, Parry is presently engaged in a wide galaxy of diversified activities. It became a member of the Murugappa group in the year 1981 and thereafter the story has been one of turnaround and of steady growth. Currently, E. I. D. Parry has evolved into one of the largest business groups in the country. It is engaged in the manufacture and marketing of a wide-range of products that can be broadly divided into the following two groups: Parryware Ceramic Sanitary ware Sugar, Bio-Products & Chemicals Sugar, Alcohol, Power, Bio-products. The company has been a pioneer in many fields, including setting up of India's first chemical fertilizer plant - at Ennore, Sugar plant - at Nellikuppam and Sanitaryware plant - at Ranipet. A strong sense of commitment and adherence to business ethics has helped E.I.D. Parry succeeds in bringing to life the larger picture and to Go Beyond in all their ventures.

Sugar Plants of the company. EID Parry has 4 plants in the country situated at Nellikuppam in Cuddalore district, Pugalur in Karur district, Pudukottai in Pudukottai district and Pettavaithallai in Trichy district. The combined crushing capacity of all the four plants is 13800 Metric Tonnes of cane per day (TCD). The Pudukottai unit of E.I.D.Parry bears testimony to the phenomenal instinct, the company has, of honing onto potential possibilities and turning them into resounding

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successes. The Pudukottai site had continuously been rejected as a prospective site for building a factory. After several futile attempts to lure companies into building their units, the Government of India approached Parrys requesting them to start a venture at Pudukottai. Although there was a lot of speculation and skepticism about the venture, Parrys took on the project with their usual indomitable will and enthusiasm determined to achieve at least a modicum of success. Currently, the Pudukottai factory is one of the largest revenue generators of the organization clearly accentuating the determination and hard work invested in it by the employees and management of Parrys. Key Facts Nellikuppam Integrated Sugar Complex: Crushing Capacity of 5000 metric tonnes per day At Pugalur, the company is setting up a 22 MW co-generation Power plant, which will be partly funded by Tamil Nadu Newsprint Limited. The Sugar Division E.I.D. Parry (India) Limited, is a pioneer in the manufacture of plantation white sugar from sugarcane. Parry set up the first Sugar Factory in 1842 at Bandipalayam, now at Nellikuppam. With the course of time, three other plants at Pugalur, Pudukottai and Pettavaithallai were established to manufacture sugar. Today, the integrated sugar complex, situated in Nellikuppam has a crushing capacity of 5,000 Metric Tons of cane per day (TCD). The Nellikuppam plant holds the distinction of being one of the largest sugar plants in India. The Bio-Products Division A keen interest in manufacturing environmental friendly bio-products led EID Parry to develop their own bio-products division. EID Parry Bio products division developed in-house technology for extraction of Azadirachtin from neem seeds. The facility is located at Thyagavalli produces and exports nearly 2000 kilograms of Azadirachtin every year. In a similar fashion, the bio-fertilizers unit at Nelikuppam produces eco-friendly fertilizers under the commercial name of Farm Boon and Garden Bloom.

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Parryware Widely renowned as a well-established and trusted leader in Bathroom solutions, Parryware has been setting new standards in the sanitary ware industry since 1952. The first to conceive the glamourooms concept, Parryware mainly focuses on introducing contemporary products to meet the evolving needs of consumers

THE MURUGAPPA GROUP: A BRIEF HISTORY The Murugappa Group began over a century ago as a small, family-run business. Today, it is a diversified $900 million conglomerate with interests in farm inputs, sugar, confectionery, building materials, abrasives, bicycles, plantations, and finance. The group has strong ties to rural India by virtue of its sugar, plantations, and inputs businesses. In fact about 60 percent of the companys profits are derived from rural India. One of the groups businesses, EID Parry, is more than 200 years old and pioneered sugar production in India. It is also in the business of making sugar based confectionery, sanitary ware, fertilizers, and bio pesticides. EID has close links to the farming community through its sugar and farm inputs divisions. The company markets almost 1 million tons of fertilizers annually to 3 million farmers. The company has about 100,000 registered sugarcane growers from more than 1,000 villages that supply sugarcane. Before the Murugappa Group took over EID Parry in 19811982, corruption and pilferage were rife, and the Nellikuppam factory was in a dire state. Factory employees shortchanged farmers. After the takeover, the Murugappa Group improved operations. Employee morale was lifted and productivity improved. The Group also installed modern weighbridges with digital displays and made the weighing process unambiguous. This generated tremendous good will for the company in the region. Over the years, EID Parry has acquired a strong rural presence. EID Parrys farm inputs division has 150 people who sell fertilizers and bio pesticides. The four sugar factories in Tamil Nadu have 150 people who are involved in procuring sugarcane. These people have intimate knowledge of rural India and have developed close relationships with farmers and their community. They are often the communitys one-stop shop for information. EID Parry has processes in place to serve its rural customers and suppliers.

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Indiagriline: Vision The deteriorating plight of the Indian farmer and the impending threat of global competition concerned the Murugappa Group. It responded by setting a goal of raising farmer incomes three times in five years. This goal was not driven only by a sense of social responsibility; management also recognized that the companys fortunes are strongly tied to the well-being of the farmer. Better farmer compensation requires providing the farmer with the know-how and resources to raise production and supply better quality inputs and access to markets. The company recognized that the actual process of enabling the farmer is also an economically worthwhile activity. The strategic goal of the Murugappa Group was to ultimately develop the following capabilities: Distribution infrastructure: This infrastructure would be capable of supporting bidirectional distribution of products and services into and out of rural India. The lack of physical infrastructure makes the cost of establishing and managing a distribution channel extremely expensive. Today not many companies can market their products and services to rural areas cost-effectively. Therefore, developing a low-cost channel for rural distribution was a key goal. Trading infrastructure: This would serve as the foundation to a platform for trading agricultural commodities and rural industry manufactured goods. By bringing real-time price and market information from local as well as distant markets and by guiding and educating farmers through complex risk-transfer mechanisms, EID Parry intended to create the foundation for a trading platform that can be brought to the fore once government policies and market institutions are in place. EID Parry saw information and communication technology (ICT) as a powerful tool for bridging the infrastructure gaps in rural India. EID Parry regarded the Internet as the next logical medium for delivering its farm extension services. It recognized the market opportunity in creating a demand for rural supplies in urban India and in fulfilling the latent demand for urban goods and services in rural India. By leveraging ICT, EID

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Parry intended to create a bidirectional demand and supply of goods into and out of rural India through partnerships. Bringing the Power of Scale to the Farmer Nuclearization of families led to fragmentation of land holdings in rural India as they passed from father to sons. Such fragmentation has disadvantaged the farmer significantly. A marginal farmer doesnt have the power of scale on his side either in procuring inputs or selling outputs. Effective use of ICT has the capacity to bring the power of scale to the farmer. Access to Real-Time Information The marginal farmer lacks direct access to markets and relies on information provided by the intermediaries. The intermediaries appropriated value from the chain by blocking the flow of information. EID Parry recognized that ICT could enable price discovery and provide access to market information, even to remote areas that lacked physical infrastructure. Access to information such as up-to-date local weather forecasts and advisories allows the farmer to make informed decisions. Such real-time information can help improve the farmers decision-making ability and thereby better align his farm output to market demands. Customization ICT can be leveraged to gain specific information about the communitys or an individuals needs and preferences, thus giving the unique ability to customize products and provide increased convenience. Transparency EID Parry also recognized ICTs ability to provide transparency by processing transactions without human intervention. The EID Parry Story 5 Business Processes at Parrys Corners: Cane Management System (CMS) CMS is EID Parrys enterprise resource planning (ERP) system that helps manage sugarcane procurement. About 5,000 tons of sugarcane is crushed daily at the

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Nellikuppam factory. Forty divisional officers manage the procurement process. They work with the sugarcane farmers on an ongoing basis and provide comprehensive assistance with all aspects of farming throughout the lifecycle of the crop. CMS enables registered sugarcane farmers to access and maintain their transaction records with the company. This application also is designed to track the progress of crops from sowing to harvesting; every aspect of cane farming is managed here. Conventionally the farmers would have to go up to the divisional office to access CMS. This system now has been Web-enabled. Instead of going to one of the factorys eight divisional offices, farmers now can go to a kiosk in their own village to leverage CMS services. EID Parrys future plans include eliminating their physical divisional offices and carrying out the cane management processes from its Parrys Corners. Financial Position Edi parry India ltd. Has gross turnover of Rs. 59517 lacs in 2004 and Rs.77078 Lacs in 2005. The company has reported net profit of Rs. 4323 in 2004 and Rs. 10426 in 2005. The company was having earning per share of Rs. 24.22 and Rs. 58.41 for Basic & Diluted shares.

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MARKET CAPITALIZATION Market Capitalization Of Sugar Industry The market capitalization of the sugar industry showed a decline of 1.92% over the month and reached Rs. 7025.51 crore as on 31 March 2005. In this period, all the major companies showed a decline in their share prices except Balrampur Chini, EID Parry, Sakthi Sugar, and Ugar Sugar Works. Sakthi sugar was the highest gainse in the month, showing a rise of 13.69% followed by Balrampur Chini (12.48%). Mawana Sugar was among the biggest losers, showing a decline of 18.94% over the month. In the three months ended 31 March 2005, the market capitalization of sugar companies showed a rise of 23.28%. All major sugar companies showed a rise in share prices, except Mawana Sugar, which showed a decline of 22.94% over the period. The highest gainer in this period was Ugar Sugar Works, which showed a rise of 56.10% followed by a 49.20% rise in Dhampur Sugar. In March 2005, the market capitalization of the sugar industry showed a rise of 320.87% over the corresponding month of the previous year. All sugar companies showed an upward trend in their share prices.

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MARKET CAPITALISATION OF THE SUGAR INDUSTRY Company Latest MCAP on 31 mar 05 Total 7025.51 Balrampur Chini 1608.69 Bajaj Hindustan 1399.86 EID Parry 952.83 Bannari Amman 515.26 Dhampur Sugar 471.87 Mawana Sugar 321.94 Sakthi Sugar 213.63 Dwarikesh Sugar 189.53 Ugar Sugar 158.68 wroks Upper Gang.Sug. 135.9 Oudh Sugar 127.64 Thiry Arror. Su. 126.85 Rajshree Sugars 110.61 DCM Shriram 9.34 Inds Rana Sugars 87.87 Simbhaoil Sugar 83.37 Dharani Sugar 52.43 Nahar Sugar 47.57 Others 321.34 Latest Price Rs. 69.4 160.35 533.8 540.1 135.4 75.75 67.1 150.9 281.85 194.7 122.85 118 448.75 72.35 25.2 74.5 20.65 27.2 Change in market capitalization (%) Over 1 month 3 month 6 month 12 month -1.92 12.48 -2.14 4.89 -1.12 -13.43 -18.94 13.69 -12.70 4.15 -13.35 -18.8 -14.18 -12.56 -16.84 -15.15 10.79 -26.25 -23.38 -8.91 23.28 41.28 37.29 31.46 9.39 57.20 -22.94 37.29 12.99 56.10 5.16 -12.44 -19.84 -11.45 -26.28 0.40 34.49 1.77 15.49 28.48 109.26 96.50 110.30 83.82 59.07 202.91 143.56 124.02 0.00 240.37 109.82 102.38 21.03 42.54 89.65 72.02 208.55 59.22 122.24 204.47 320.87 2627.98 293.88 164.84 82.47 426.88 347.70 158.10 0.00 337.62 236.55 277.97 251.19 106.55 212.59 172.47 446.33 312.83 216.18 423.95

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STRATEGIC MANAGEMENT TECHNIQUES The first fundamental determinant of firms profitability is industry attractiveness. Competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industrys attractiveness. The ultimate aim of competitive strategy is to cope with and, ideally, to change those rules in the firms favor. In any industry, whether it is domestic or international or produces a product or a service, the rules of competition are embodied in five competitive forces: the entry if new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and the rivalry among the existing competitors.

Potential Entrants

Threat of new Entrants

Supplier

Bargaining power of Industry competitors

supplier

Bargaining power of buyer

Buyers

Rivalry among existing firms

Threat of Substitute products

Substitutes

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The five forces determine industry profitability because they influence the prices, costs, and required investment of firms in an industry the elements of return on investment. Buyer power influences the prices that firms can charge. The power of buyer can also influence cost and investment, because powerful buyers demand costly service. The bargaining power of suppliers determines the costs of raw materials and other inputs. The intensity of rivalry influences prices as well as the costs of competing in areas such as plant, product development, advertising, and sales force. The threat of entry places a limit on prices, and shapes the investment require to deter entrants.

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FIVE COMPETITIVE FORCES IN SUGAR INDUSTY Bargaining Power of Buyer Every one of us consumes sugar everyday major buyers of sugar are ultimate retail consumes and other food and beverages industry. Sugar has no perfect substitute so buyers have limited bargaining power following factors influences bargaining power of buyers. Price of sugar is determined based on demand and supply and government policy, so the buyers have to accept it with minor variations. Because of government levy quotas, millers have to sale at fixed prices to the government. Sometimes because of government pressure for decreasing price for general public sugar millers have to sale below production costs. Lack of branding in Sugar Company can not charge premium prices for their product. Bargaining of Supplier Sugarcane grower farmers are the only suppliers of raw material for sugar industry. In bargaining power of suppliers also government interventions play pivotal role. Following factors determines their bargaining power. Mills have to purchase at government determined SMP( statutory minimum price) from the farmer. Because of government rules that mill have to purchase sugarcane from terminated lower areas their have low power. Farmers are unorganized so sometimes sugar producers can take advantage of high crop production by purchasing at low price directly from farmers. In production of sugar, sugarcane costs almost about 2/3 of total cost and for that matter in smooth functioning of mill, they have to maintain buffer stock which increases carry over cost.

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Rivalry among Existing Firms In sugar industry there are public limited, private ltd and cooperative players. For sugar there is low product differentiation which increased tuff competition in increasing their market share. In industry there is low product quality differentiation which hurdles branding and strong buyer demand. Most of the sugar mills are producing in similar production process and technology used is also more of less same. Sugar industry lacking in advertising their product, so they face product awareness in users. In sugar industry major players have huge market share and small mills are facing threats from these big players. Threat of New Entrants As per as sugar industry concern in India there is a very low threat of new entrants because there are many barriers to enter and survive into the sugar industry. Due to the following reasons threat of new entrants is low in sugar industry: In sugar industry for competing with major players requires high investment. For starting sugar mill government impose restriction on location preferences. There is risk in sugar industry compare to other industry because of seasonal business. There is a high fluctuation in demand and supply will create a high level of risk for the company. In sugar industry price of sugar is decided by government for quotas and there is a high fluctuation in prices due to demand and supplies will incur risk. As per as the selling of sugar concern government levy quotas and force the company to sell a particular portion through PDS which is some time below production cost. Low profit margin de motivates the new entrants.

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Threat of substitute product Sugar is the most important product for the livelihood of the people. There is no perfect substitute of this product but sugar free and sacerine are use as a substitute up to certain level. In todays world more and more people are becoming health conscious and will try to avoid sugar because of major disease causes like diabetes, heart attack etc. In a high innovative world of today new technologies and techniques are finding new substitutes of sugar.

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SWOT ANALYSIS OF SUGAR INDUSTRY SWOT analysis plays a important role in improving the condition of an industry which considers internal strength and weakness and which also compiles external threats and opportunities. SWOT analysis is necessary to choose a base strategy to suit a particular situation. Strengths Following are the major strength of Indian sugar industry India is the largest producer of sugar, flowed by Brazil. It has also the largest number of consumers with the total consumption exceeding 18 million tonnes. About 45 million sugarcane farmers, they dependents and a large mass of agriculture laborer are involved in sugarcane cultivation, harvesting, and ancillary activities, constituting 7.5% of the rural population. India has reported 15.411% share in 2000-01 world sugar production which is highest in the world. In march 2005, the market capitalization of the sugar industry showed a rise of 320.87% over the corresponding month of the previous ear. Most of the sugar mills are located in rural areas which boosts rural development.

Weakness Following are the major Weakness of Indian sugar industry. Productivity as measured in terms of mandays per tonnes of sugar in India is one of the lowest in the world in India it works in India it works out to 10-15 mandays as compared to 0.58 in Hawaii. 0.64 in Puerto Rico, 2.10 in Philippines and 0.98 in Louisiana. As a result, the cost of production of sugar in India is relatively higher. This is due to several reasons. Government policy plays pivotal role in determining levy quotas, export quotas, pricing etc. which invites too much interference in smooth functioning of sugar mills.

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Government has policy for determining for export quotas which hinders export promotion for sugar mills. Because of unorganized agro sector India statutory minimum price (SMP) is not implementing properly. For sugar mills sugarcane is the only raw material which has a high transportation cost. Because of this reason sugar mills lacks urban infrastructure facilities. In India most farmers are illiterate so they lack in various techniques and fertilizer for producing qualitative sugarcane.

Opportunities Following are the major opportunities for Indian sugar industry. Sugar industry has been suffering from inadequacy of cash credit limit for he past few years. The landing banks should come forward to provide adequate cash credit limit to sugar industry. The measure would enable them not only to fund buffer stock adequately but also to minimize the product loss by utilizing sophisticated information technologies. Sugar industry mainly producing sugar and in off season companies can concentrate on other products like ethanol, alcohol etc. Government can increase export by formulating stable and favorable export policy. Improvement in technology as well as by increasing private participation for efficient utilization of resources can improve Indian sugar industry. Education to farmers using various medias for improving cultivating techniques can increase production of sugarcane per hector. Threats Following are the Threats for Indian sugar industry. High fluctuation in demand and supply of sugar leads to deficit or buffer stock of sugar and invites high holding cost.

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Existing players are trying to increase their market share by acquiring smaller mills which is threatening smaller mills. Sugar industry is agro based industry which is highly depended on monsoon in sugarcane producing areas. Due to this reason it can create fluctuation in supply of raw material. A diversion of sugar cane in factory area for the production of gur and khandsari. Sugar industry is seasonal business which can decrease its importance to employees because of ideal in off seasons. Because of instability in pricing of sugarcane farmers are switching to other crops.

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FINDINGS AND CONCLUSION Some of the important points that emerge out of the present study have been highlighted below: In general, the Indian sugar industry is not export-competitive at present either in disjoint or in integrated form. The price paid to the farmers for sugarcane is very high compared to statutory minimum Price (SMP). Many times, due to political compulsions, the state governments and cooperative enterprises increase the level of sugarcane price to be paid to the farmers. This has very adverse impact on the competitiveness of the industry. In general, the integrated sugar mills are more competitive as compared to the disjoint ones. Therefore, effort should be made to integrate the firm and farm sectors for increasing competitiveness of the sugar industry. A common platform for farmers and processors with scope for internal bargaining between the two groups under the same umbrella organization and in the spirit of brotherhood, therefore, gives more competitive buffer to the sector in a global market. Increase in installed capacity and crushing duration have positive impact on the competitiveness of the industry up to a certain level. A very long crushing season, or too large a unit, however, may have adverse impact on competitiveness in Indian industries. The sugar mills that are situated in sub-tropical zone seem to show positive impact on the competitiveness as compared to the same in tropical zone. These findings highlight the need for national policy changes to encourage more sugar mills in sub-tropical rather than in tropical zone, where irrigation potential is also lower. More recent sugar mills with newer machineries and generally better recovery rates also display greater competitive strength. This is not true of the mills which have generally failed to make investment in sugarcane processing given the highly regulated policy environment of the industry. It is immaterial whether the sugar mills are running under private, government or cooperative system, as dummy variable representing any specific segment does not show on average any statistically competitive edge over others.

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LIMITATIONS The present study is based on secondary data collected form various publication, web sites, annual reports, magazines, newspapers etc. For the study of Indian sugar industry time duration offered to us was not sufficient to study in depth. As a student of management and for strategic management subject we have limited our research for strategic management techniques only. We have not covered technical things. We have used literature review of other researcher which may be under their perceptions and actual may be differ.

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BIBLOGRAPHY 1. 2. 3. 4. 5. 6. 7. 8. 9. Letter of offer of Oudh Sugar Mills Ltd. www.birla-sugar.com www.indiainfoline.com Balrampur Chini Mills Ltd. (www.chini.com) Bajaj Hindustan Ltd. EID Parry (India) Limited. (www.eidparry.com) Indian Economic Review. Saket industry review. Monthly Public Opinion Survey.

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