Sugar prices hold strong as the Government didn’t raise ethanol prices again this year, but it allowed a certain export of sugar quantity, says Avantika Saraogi, Executive Director, Balrampur Chini Mills, one of the largest integrated sugar manufacturing companies in India. In an interview with businessline, Saraogi said the company’s proposed polylactic acid (PLA) plant in Uttar Pradesh is expected to be commissioned in the third quarter of the financial year 2026-27. Excerpts:
Balrampur Chini Mills’ board has approved the higher capacity of the proposed polylactic acid (PLA) plant with a revision in the project’s capital expenditure. Why is the plant’s capacity being increased? When are the products expected to hit the market?
The project is on time. We will commission it in the third quarter of the financial year 2026-27, as announced in February last year. The increased capital expenditure is to make the plant more efficient, save on operational expenditure, and have a more stealth plant. Also, we did have the tailwind of the Bioplastic Policy announced by the Uttar Pradesh government. That was not the decision maker, but it helped us. In terms of capital subsidy, we expect around ₹1,100 crore as per the State Government scheme. So, after subsidy, the net capex of the project will be ₹1,750 crore.
We should have raw PLA hitting the market from the PLA plant two to three months after the commissioning of it. But, in the meantime, we are already seeding the market with the materials we are bringing in. We are already testing the materials and working with compounders and converters while making prototypes. So, towards the second half of this year, we will be selling PLA. It won’t be produced in our factory, but it will be the same thing we will produce once our factory is ready.
For the third quarter of this fiscal year, the company’s net profit was up on a standalone basis compared to the same period last fiscal year. However, revenue fell. What were the reasons behind this performance?
The end of the ethanol year (which ends in November) is part of the third quarter. Last to last year there was no restriction on ethanol production from sugarcane. But last year there was a restriction on ethanol that we cannot produce from sugarcane juice. So, in the last quarter of the ethanol year, we had zero ethanol in our storage. That is why the revenue from the distillery was lower. We did not have the ethanol we normally had if we could had produced and sell. And then we are holding more inventory than we did last year, because we produced more sugar and all the sugar sold over the whole year. We were also stuck with a buffer. So those were the reasons. The profit was up because the realization from sugar was higher in this financial year compared to the last financial year.
What is the outlook for sugar prices going forward?
It should be stable. Also, the fact is that the government didn’t raise the ethanol prices again this year but it allowed a certain amount of sugar to be exported. So that has made the prices hold strong. It’s more at par with global prices, which is good.
In the fourth quarter this fiscal, how do you see the company’s distillery segment performing?
Because the ethanol price revisions haven’t happened, I don’t see anything going too well. The distillery segment will not perform well. The input price has increased, but the output price has not increased, plus the recoveries are slightly lower. FRP (fair and remunerative price) of sugarcane has gone up from ₹305 per quintal to ₹340 per quintal, but ethanol price has not increased. Before 2023, every time the cane price was increased, the FRP was increased, and the ethanol price was automatically hiked to the same percentage. But this time, that did not happen. Even if they had increased it by a lower percentage, it would have helped because, over the years, everybody’s conversion technology has become better. But having said that, the sugar segment has well outperformed to cover up that loss. If you see it as a complex, we are okay. But if you want to divide up the businesses, the distillery is taking a beating for sure.
Any particular Budget announcement that would help the sugar industry?
In her Budget speech, Finance Minister Nirmala Sitharaman said a National Mission on High Yielding Seeds will be launched to develop and propagate high-yielded seeds. We are working on it; everybody is working on it. It is good to see the subject was mentioned in the budget. Indian sugarcane productivity is much lower than the global average. And this is very, very important to the whole landscape. If productivity increases in sugarcane, many things will take care of themselves. We may need less and less help from the Government, and even the farmers will need less and less help. If the productivity is higher, the greenhouse gas emission factor is lower. And that is a very, very important thing. So, enhancing productivity will be a game changer for the country.
Published on February 10, 2025
