Shree Vaani Sugars & Industries Ltd merged Management Discussions

SHREE VAANI SUGARS AND INDUSTRIES LIMITED ANNUAL REPORT 2003-2004 MANAGEMENT DISCUSSION AND ANALYSIS a) Industry Structure and Developments SUGAR DIVISION: The Sugar industry in ltd, is a control Industry wherein the government of India controlling the release of sugar in open market by way of monthly quota for each sugar mill vesicles RAV the cane price. There are over 436 sugar mills in india which produces a over 180 lakhs tons of sugar every season. The sugar industry is also besieged with excess inventory. Due to high inventory levels with the domestic sugar mills and also because of the controlled release mechanism, many sugar mills could not meet the statutory commitment of payment to the cane farmers on time. To over come the payment problem many sugar factories approached, their respective high courts, who have permitted additional sales saver and above monthly release quotas. This has helped most of sugar factories including your company. On account of these sales, it has resulted in a pressure on selling prices. During the year, the availability of cane for sugar production was affected because of unseasonal rains/ storm and draught. This in turn has reduced the sugar production in india. Now since most of the mills have sold off their piled up inventory and also the production during the sugar season is lower than expected, the sugar prices have slowly started to look up. POWER DIVISION: Government of India has encouraged the sugar plants to set up Bio mass based co-generation power with the bagasse generated from the sugar mill as fuel with supply to the grid under Power Purchase Agreement (PPA). The Power division of your company commenced the commercial operation with effect from 08.08.2003. There were teething problems during the off season when the Bagasse was not sufficient and alternative Biomass products has to be used there was a general increase in the Bio-mass prices as most of the sugar manufacturing units had set up co-generation plants thereby increasing the demand for the biomass available. this has brought the co- generation plants under a lot of pressure and the cost of generation per unit of power currently more than the selling price of unit. The APERC has issued notification for reducing the power tariff from Rs.3.48 per unit to Rs.2.65 per unit with effect from 01.04.2004. The industry has approached the High Court of Andhra Pradesh against this unjust reduction in the power purchase tariff. Also AP Transco has abstained from paying for the efficient running of your company by limiting the purchase to only the installed production capacity as mentioned in the DPR and not paying for the units generated more than envisaged in the DPR. b) Opportunities and threats: Mixing of Ethanol with petrol has improved demand for molasses, which is positive factor for sugar industries. Which is expected to grow further. However, excess capacities in the Sugar industry are for concern: c) Segment wise performance information: The segment wise information is given separately in note no. 10 in the schedule ` Q` Notes on Account for the year ended 31st March 2004. As per accounting standard 17 issued by the institute of Chartered Accountants of India. d) Out Look: Division-wise out look has already been furnished elsewhere in this Report. e) Risks and Concerns: The sugar and power Industries being core Industries, there is no risk of product obsolescence nor steep fail in demand by way of product substitution or otherwise and therefore, your Directors do not foresee any major risks anti concerns, in the near future except as discussed elsewhere in this Report. f) Internal Control Systems: Your company is having proper and adequate internal control system in order to ensure that assets are safeguarded against toss from un-authorised use or disposition and that all transactions are chinked, verified, recorded and reported correctly. Regular internal checks are carried out to ensure that tins responsibility are executed effectively. The Board of Directors have constituted an Audit Committee chaired by an independent director. The committee meets periodically with the management and statutory auditors to review audit plans and results. g) Financial / Operational performance: The operational profits / (loss) as cored to the previous year has been discussed separately in this Directors Report. CAUTIONARY STATEMENT: The management Discussion and Analysis report containing Companys objectives, projections, estimates and expectations may constitute certain statements, which are forward long within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement, The company`s operations may interalia affect with the supply and demand situations, input price and the availability, changes in the government regulations, Tax Laws and other factors. Company cannot guarantee the accuracy of the assumptions and per received performance of the company in future. The Investor should bear the above in mind.