Parvati Sweetners and Power Ltd Management Discussions.

Global Sugar Industry:

Global production for Marketing Year (MY) 2019/20 is forecast up 2 million tons to 181 million (raw value) as higher production in Brazil and the EU more than offset an 8-percent decline in India. Consumption (up for over 25 consecutive years) is expected to rise due to growth in markets such as Egypt, India, Indonesia, and Pakistan. With high demand, exports are forecast up and global stocks are forecast 8 percent lower on reductions in India, China, Pakistan, and Thailand.

U.S. production is forecast up 2 percent to 8.3 million tons due to expected reduced early-season harvested area that pushes a large proportion of crop-year production into the 2019/20 marketing year. Imports are 13 percent higher at 2.9 million tons based on projected quota programs and the calculation of U.S. Needs as defined in the amended Suspension Agreement. Record consumption is forecast up slightly on population growth while stocks are down 1 percent.

Indias consumption is forecast at a record due to a growing economy. Exports are forecast at 3.5 million tons with total exports expected to include 1,0 million tons of sugar re-exported under the Advance Authorization scheme and the remaining 2.5 million as commercial sales. Stocks are down 4 percent but are more than double minimum stock requirements of around 3 months consumption.

Indian Sugar Industry

Registering an overall growth rate of 6.7% in financial year 2017-18 (FY18), India regained its status as the fastest-growing economy in the world. With a $2,597 Trillion GDP, it has outpaced France to become the sixth largest economy globally.

During the year, the Government of India executed several broad structural reforms. The landmark Goods and Services Tax (GST) was enforced from 1st July, 2017. Introduced on the heels of demonetization in 2016, GST sought to further formalise the economy. This unified tax regime eliminates the cascading effects of a multi-layered tax structure. The Government also pursued recapitalisation of public sector banks, the Insolvency and Bankruptcy Code/bill (IBQ and the Ujwal DISCOM Assurance Yojana (UDAY).

Sugar production is expected to be 32.2 MMT as compared to 20.2 MMT last year. This is due to a bumper production increase in the state of Maharashtra, Uttar Pradesh and Karnataka, which together produced 26.5 MMT vis-a-vis 15.1 MMT the previous year, a sharp rise of 11.4 MMT.


A good monsoon in 2016 and 2017 had resulted in 45-50% increase in acreage in Maharashtra, while Uttar Pradesh witnessed an early start to the crushing season. With adequate rainfall, more planting and increased sugarcane acreage, the same trend is expected to repeat in 2019-20 season. According to initial industry estimate, sugar production is forecasted to be 35.0 MMT vis-a-vis last years production of 32.2 MMT whereas the consumption is estimated at 25.7 MMT. Therefore, ending stocks of sugar shall continue to increase even in the year 2018-19 to 19.8 MMT, against 10.5 MMT of previous year unless India exports in large quantities to ease the extra stock burden.

Government Policy Initiatives

The Government of India took several steps in the current year to encourage the sugar industry and exports. In order to stabilise the domestic prices, the Government of India introduced policies to balance the supply and demand of sugar in domestic market. The Government of India later in the month of June 2018

reintroduced a monthly release mechanism for sale in domestic market. It also declared a minimum sale price of 29 per kg of sugar for the sugar mills. The Government of India allowed the exports of sugar under Duty Free Import Authorisation Scheme. It also announced a Minimum Indicative Export Quota (MIEQ) of 2 MMT across the industry. Import duty on sugar was increased to 100% and export duty of 20% was removed.

Segment Wise Performance

The Company operates in the single segment i.e. manufacturing of Sugar and the operational performance of the same is briefed in the Boards Report.

Risks & Concerns

Some of the risks that may impact the Companys operations are:

• Global fluctuations in demand and supply of sugar

• Macroeconomic factors that affect demand and supply of sugar, ethanol and power, including price fluctuations, interest rate volatility and adverse foreign currency movement (especially in countries where the Company conducts business)

• Seasonal uncertainties that impact the production of sugarcane

• Unfavourable shifts in government policies and regulations

• Increased cost of logistics

• Work stoppages owing to union strikes and other reasons

• High rate of attrition among employees

Internal Control System

The Company has formulated a well-defined and structured internal control system, commensurate to the size and nature of its business. Stringent procedures ensure high accuracy in recording, as well as providing reliable financial and operational information, while meeting statutory compliances and safeguarding assets from unauthorised use. The Companys internal team and an independent internal audit firm monitor the business operations and any deviations are immediately brought to the notice of the Management and Audit Committee for timely correction.

The Audit Reports, submitted by the Internal Auditors, are reviewed by the Audit committee. Any suggestion for improvements submitted to the Committee is considered and the implementation of corrective actions, wherever required, is followed up. Statutory and Internal Auditors axe also invited to the Audit Committee meetings to ascertain their views on the adequacy of internal control systems. Periodically, the Board of Directors is informed of the same.

Human Asset Management

The Companys workforce is its biggest asset and central to its success through the years. People, across tiers, levels and functions, drive the Companys profitability through their sense of ownership and purpose. With dedicated human resource policies in place, the Company endeavours to provide a learning-oriented high-performance work culture. In this manner, it not only establishes a transparent and supportive work environment but also nurtures the holistic growth of employees in conjunction with that of the organisation. There axe several training and development programmes conducted throughout the year to build capabilities and upskill staff members.

Environment, Health & Safety

The Company adheres to mandatory Environment, Health and Safety (EHS) requirements and is committed to adopting stricter standards wherever suitable. It is fully cognisant of its responsibility towards the environment it operates in and the welfare of the people it employs. Workers safety is paramount and a comprehensive array of measures is implemented across all manufacturing locations to ensure the same.

Given the nature of the sugar industry, investments are consistently made to follow industry-leading effluent management practices and reduce the carbon footprint of the organisation. Besides, the two focus areas of the Companys sustainability initiatives are community healthcare and education