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Industry Structure And Development World Sugar

The global sugar production during the year 2022-2023 Sugar Year (SS) is expected to be around 180.4 million metric tons as against 172.5 million metric tons reported in the previous year. The consumption during 2022 - 2023 SS is expected to be around 176.2 million metric tons against 174.7 million metric tons in the previous year. Sugar production during the forthcoming year 2023 - 2024 SS is expected to marginally improve to around 182 million metric tons and the estimated consumption is around 177 million metric tons resulting in a surplus of about 5 million metric tons.

Sugar production in Brazil is expected to increase during the year 2022- 2023 SS due to diversion of more cane juice to sugar production than the earlier estimate. The industry is focusing on increasing sugar production to take advantage of better sugar price and demand in the international market.

In Thailand the production is expected to be around 11.5 million metric tons which will be higher by around 1 million metric tons than previous season. EUs sugar production during 2022-23 is expected to reduce than previous season. The U.S. Climate Prediction Centre in its report has raised the likelihood of an El Nino weather pattern which emerges between August and October months from 61% to 74%. If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting sugar production. The last time El Nino brought dryness to sugar crops in Asia was in in the years 2015 and 2016.

The sugar price in the international market has improved significantly making exports from India very attractive.

However, export from India is restricted to protect the domestic consumers.

indian sugar

Indias sugar production during the sugar year 2022 - 23 is expected to be around 32.8 million metric tons as against previous sugar years production of 35.8 million metric tons. The lower sugar production is mainly due to reduction in Maharashtra owing to poor crop yield and diversion of more sugar to ethanol. The sugar consumption in 2022-23 is expected to be around 27.5 million metric tons against previous years 27.2 million metric tons. It is pertinent to note that around 4.0 million metric tons of sugar (in the form of sugarcane juice or B-Heavy molasses) is expected to be diverted to ethanol production, which is excluded in the current sugar years estimated production of 32.8 million metric tons.

In the beginning of the year 2022-23, the opening stock of sugar was 6.8 million metric tons as against previous years stock of 7.2 million metric tons. The expected closing stock at the end of sugar year 2022 - 23 would be around 5.7 million metric tons after considering the current sugar years expected export of 6.0 million metric tons. For the sugar season 2022-23, the Government of India has fixed Fair and Remunerative Price (FRP) for Sugarcane, linked to 10.25% recovery at 3,050 per ton. A premium / rebate @ 30.50 / ton of sugarcane is applicable for the increase / decrease in recovery of every 0.1% from 10.25% recovery. However, sugar factories having recovery of 9.5% or less, the FRP is fixed at 2,821.25 / ton. Though, the sugarcane procurement price has been increased in the past two seasons, the Minimum Selling Price (MSP) of Sugar, which was fixed at 31/Kg in February 2019 has not been increased.

The Government of India has not announced any incentive for sugar export. However, since the sugar price in the international market is reasonably good, export from India

-23 is quite profitable. is expected to be at 6.0 million metric tons as against 11.2 million metric tons of previous year.

In order to protect the domestic consumers of sugar and to stabilise the sugar price in the domestic market, Government of India has banned further exports beyond 6.0 million metric tons.

On the ethanol front, as much as 440 crore litre of ethanol was blended in petrol during the supply year ending November 30, 2022. For the next year, 540 crore litres procurement is being targeted with an eye to start larger volumes of blending. India saved as much as 53,894 crore in forex outgo from 10 per cent blending besides benefitingthefarmers

E-20 (blending 20% ethanol with petrol) has been launched in Feb.23. In the first phase, E-20 petrol is made available at 84 petrol pumps of three State-owned fuel retailers in 11 States/UTs. and in the next two years it will be expanded throughout the Country.

government Policies government of india (goi) has taken the following measures:

(a) GOI is continuing the monthly release mechanism for sugar which was re-introduced from Jan 2019.

(b) For the marketing year 2022-23, the Ethanol procurement price has been fixed 49.41 per litre for the Ethanol produced from C-molasses,

60.73 per litre for the Ethanol produced from

BH-molasses and 65.61 per litre for the Ethanol produced from 100% sugarcane juice / syrup.

(c) ethanol policy:

In June 2021, the Government of India has announced "Roadmap for ethanol blending in India 2020-25". Under this road map, 20% blending of ethanol with petrol is envisaged by Ethanol marketing year 2025 - 2026 which will absorb substantial portion of surplus sugar in the country.

tamil nadu government has taken the following measures:

(a) As per Tamilnadu Sugarcane (Regulation of purchase price) Act 2018, Act no. 23, the cane price payable shall be as per the revenue sharing formulae or FRP, whichever is higher.

(b) The Government of Tamilnadu has disbursed a production incentive at the rate of 195/ton directly to the farmers for the sugarcane supplied during crushing season 2021-22. For the crushing season 2022-23 also, Government has announced in the budget that the same amount of 195/ton of cane will be paid to the farmers.

(c) tn ethanol Policy:

During March 23, TN Government has also announced the Ethanol blending policy 2023. The policy envisages achieving self-sufficiency attracting investments in the sector.

opportunities and threats

The Central Governments push to produce more ethanol, by granting subsidies to build more ethanol plants and by increasing procurement prices of ethanol produced from B-Heavy molasses and 100% sugar cane juice is helping the industry in a big way by absorbing significant portion of surplus sugar production. In the long run, India will have the option of balancing both sugar and ethanol production based on the market requirement. The Govt. Policies like MSP and monthly sugar release mechanism would help in stabilisation of the sugar price.

Reduction of Agricultural labour force in Tamilnadu and the sharp increase in the labour cost will have serious impact on the sugarcane cultivation in the long run. Therefore mechanisation of sugarcane cultivation is to be expedited.

Vagaries in the monsoon pattern will have impact on the availability of sugar cane which is the major raw material. Any further increase in Fair and Remunerative Price, for the sugarcane, for the sugar season 2023-24 will have impact on the financials of the company if the Minimum Selling

Price of sugar is not proportionately raised.

segment-wise or product-wise performance of the company sugar:

In 2022-23 financialyear, 10,87,693 tons of sugarcane was crushed as against previous years 8,74,135 tons. This increase of 24.4% in crushing volume is possible due to marginal increase in the cane planting area and sugarcane yield improvement. Favorable agro-climatic conditions like near normal rainfall coupled with supportive government policies and incentives and various service support extended by the company has helped in improvement of cane volume. in ethanol production and


Power generation in the financial year 2022 - 23 was 882.5 lakh units against previous years 716 lakh units. This increase in power generation is attributable to higher cane crushing. Long term PPA with TANGEDCO continues for Sathamangalam unit with a tariff of 4.669/Kw-hr. The tariff revision is due from April 22 onwards. From Kattur unit, power is being sold to open access consumers and IEX.


During the financial year 2022-23, the total alcohol production was 17,822 KL against previous years total production of 17,196 KL. This total production includes 893 KL of Ethanol production. As the availability of own molasses was inadequate, the company had procured 33,000 metric tons of molasses from other factories in the state and operated distillery for the maximum possible number of days.

Quantitative Performance details:

The Company is engaged in three major segments, namely Sugar, Cogeneration of power (Cogen) and Distillery. The segment wise performance for the year is as under:

Production 1,03,854 882 178
Sales 1,03,414 453 176
Sales 36,063 13,789 10,237
Operating Profit (952) 3,013 5,208

out look:

Indias Sugar production for the season 2023-24 is estimated to be around 33 million metric tons after considering diversion of sugarcane juice / syrup / B heavy molasses. This will result in surplus sugar availability in the market and hence the price of sugar is likely to be under pressure. The global sugar production is expected to be around 182 million metric tons and consumption is estimated to be around 178 million metric tons. The predictions of El Nino setting during southwest monsoon period in India during 2023 is expected to have impact on the rainfall and weather pattern. risk and concerns industry risk

Whenever there is surplus sugar production in the country the selling price falls below the cost of production. Most of the times when India produces surplus sugar, the Global sugar production also becomes surplus. Hence, exports also become unviable.

risk mitigation

Ethanol production capacity should be increased to absorb surplus sugar available in the market for stabilisation of sugar price in the long run. Development of alternate usage of sugar and positive and proactive policies by the Government are the key drivers. The monthly sugar release mechanism and minimum selling price for sugar introduced by the Central Government helps in stabilisation of sugar price.

Risk specific to the Company

Though the Northeast Monsoon (NEM) rainfall during 2022 was reported as normal, your factory command area received less rainfall than a decade average. This will adversely affect raw material availability for the company, which will affect overall capacity utilization.

risk management

Your company gives top priority for development of sugar cane in the command area by optimizing utilisation of all resources.

A few major initiatives taken by the company are given below.

(i) Working on development of new sugar cane clones having characteristics like higher yield, high sugar recovery, early maturing, drought tolerant, pest & disease resistant etc., in association with SISMA, TNAU and Sugar cane Breeding Institute, Coimbatore. (ii) Bulk planting of high yield and high sugar varieties like Co-86032, CoV-09356, Co -11015, COG-7 etc., in both the units command area.

(iii) Educating farmers on modern cultivation practices (iv) by organising technical seminars, providing technical support, demonstrating modern practices in Demo plots, etc.

(v) Providing technical and financial support to the farmers on development of irrigation infrastructure such as well deepening, lift irrigation, installation of new bore/pumps etc.

(vi) Promoting water conservation systems like micro irrigation system in association with the State Agriculture department.

(vii) Mechanization of cane cultivation right from ploughing to harvest to the possible extent to reduce the cultivation cost to the farmers and to reduce the dependency on labour.

discussion on Financial Performance with respect to operational Performance operational review and state of affairs

Production 2022 - 2023 2021 - 2022
No of crushing days:
Kattur Unit 184 146
Sathamangalam Unit 187 163
Cane Crushed (tons) 10,87,693 8,74,135
Sugar Recovery (%) 9.57 9.70
Sugar Produced from cane (Quintals) 10,38,540 8,44,380
Alcohol Produced (KL) 17,822 17,196
Power Produced (lakh kwh) 882 716

Due to the increase in sugarcane availability the crushing has increased by over 24% compared to the previous year. The FRP (Fair and Remunerative Price) has risen by 5%, Chemicals etc. increased by 13% and packing costs were reduced by 8% during the operating year. The realization from sale of sugar improved by 3%. This resulted in the sugar segment posting a lower loss. ability marginally decreased profit Inthedistillerysegmentthe due to lower sales, which is down by 8% with marginal increase in production by 4%. However, the realization of distillery products improved 7%.

Power segment profitability significantly improved owing to sale of bagasse.

The finance cost decreased by around 5% compared to the previous year due to repayment of term loans, and a reduction in usage of short-term borrowings despite higher interest rates announced by RBI from time to time.

internal control systems and their adequacy

The Company has established a system of internal control across all its business operations and for safeguarding the Assets. The functions of Internal Audit are carried out by an Independent firm of Chartered Accountants, who submit their Reports on a quarterly basis to the Management. These Reports are placed before the Audit Committee at its meetings for review. The Board, Audit Committee and the Management ensure that the internal financial control system operates effectively, and they periodically review the effectiveness of internal control system in order to ensure due and proper implementation and due compliance with applicable laws, accounting standards and regulatory norms.

The Internal Auditors review the adequacy of internal control systems and suggest necessary checks and balances to ensure and increase the effectiveness of the system and that the policies are in place for approval and control of expenditure.

human resources / industrial relations

Human resources are the most important resources in an organization and need to be used efficiently, because success, stability and growth of an organization depend on its ability in acquiring, utilizing and developing the human resources for the benefit of the organization. Employees attend a series of training sessions on Technical and soft skills as part of Employee Development Program. Special Onsite Program and In-house Training program were conducted on safety. During the year, industrial relations have continued to be cordial, conducive, and mutually productive.

The Human Resources Department created an Internal Complaint Committee for the prevention and redressal of sexual harassment of women at workplace as per the requirement of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013. There were no incidents of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Total number of employees as on 31st March 2023 was 521 in respect of sugar and allied operations.

Key Financial ratios

description U/M 2022-23 2021-22 remarks
Debtors Turnover Days 16 19 In line with the previous year.
Inventory Turnover Days 85 100 Higher sales under cash and carry basis.
Interest coverage ratio Times 15 11 Higher earnings and working capital borrowing.
Current ratio Times 1.78 1.61 Higher Inventory owing to higher production.
Debt Equity ratio Times 0.68 0.79 Increase in net worth due to higher PAT and repayment of Term Loans.
Operating Profit Margin % 7.64 8.40 Sales and margin mix.
Net Profit Margin % 6.87 8.04 Lower due to product volume and margin mix and higher tax provisioning.
Return on Net worth % 17.56 16.75 Higher retained earnings due to product volume and margin mix.


On behalf of the Board
for Kothari sugars and chemicals limited
Place : Chennai nina B. Kothari
date : May 30, 2023 Chairperson