Corporate

A Story Sweetened Over The Years

Godavari is a story sweetened over 77 years and stands on the pillars of three generations. From sugar production to over 20 different products from sugar cane, the company has come a long way.

Almost eight decades back, a young man, looking for work, met a few Marwari traders. They asked him if he could help them trade sugar in Maharashtra. He said “yes” and started trading. Slowly and eventually, he entered into the manufacturing of sugar and in 1939, Godavari Sugar Mills was established. Today, Godavari is a story sweetened over 77 years and stands on the pillars of three generations. Since its inception, Godavari Sugar Mills donned upon numerous avatars- from sugar production and sugarcane farming to ethanol distillation in the 1960s and later it entered into the manufacturing of ethanol based chemicals by the early 70s.

More recently, the company reinvented itself as Godavari Bio-Refineries and added value to agriculture feedstock by not just making sugar, but also, bio fuel, renewable electricity and a range of commodity and specialty chemicals.

Milestone of change

Staying ahead of times, Godavari, in its very early phase decided to think beyond the borders and work towards international trade. Change in government policies in 1992 created a challenging environment for the company. Godavari decided to confront the challenge and reinvent itself.

“During the time of liberalisation, the government lowered the import duties into India. They also removed the controlled price of molasses, which was the raw material for us. Taken together, the government regulations changed as far the local molasses market was concerned and with the lowering of duties on chemicals, we were exposed to international competition,” said Samir Somaiya, chairman & managing director, Godavari Biorefineries Ltd.

“These were the two significant changes in the external environment which made us think that as we prepare ourselves for the future, we want to grow in a way so that we can compete with the global competition. This meant that our products need to be of exportable quality and we need to be knowledge driven,” continued the third generation entrepreneur of the company.

And thus, Godavari steered its organisational direction towards strengthening its research knowhow. “In those days, the 90s, research and development was just a quality control measure. We however decided to start developing our own knowhow and become a company that would be at the cutting edge of research,” said Somaiya.

Today, Godavari Biorefineries boasts of its deep rooted research and development practices for enabling the company to become one of the largest sugar producers in India in single location and one of the leading manufacturer of ethanol, ethanol based organic chemicals, renewable power & bio fertilizers.

“As a fresh chemical engineering graduate, the first assignment that my father gave to me was to develop a department for research that can make products to face international competition and a department that will try to strengthen company’s exports. My skills were put to test immediately and the team that I built then is still there today,” recalled Somaiya.

The company currently has a team of over 30 persistent scientists working towards making new products and innovation.

Manufacturing Excellence

The company has two large manufacturing locations in Maharashtra and Karnataka. Sugarcane as a feedstock is converted to sugar, ethanol and electricity. Ethanol is then converted to a range of commodity solvents and specialty chemicals. The company currently manufacturers about 20 products from sugarcane and is now working on making products from Bagasse other than electricity.

The company also manufactures natural waxes and compost and has also recently entered the branded segment with sugar, salt and turmeric under the brand name Jivana. “Our chemical products go into a wide variety of fields such as printing inks, intermediates of pharmaceutical, paints, cosmetics, frothers, etc. This all comes from a knowledge driven approach to business,” said Somiaya.

Solutions for the industry

• Flavours and Fragrances
• Mining: Replacing MIBC as a frother due to its carcinogenic property
• Plasticizers: Working on replacing carcinogenic phthalates
• Cosmetics: Making natural skin-friendly emollients
• Renewable Power: Using sugarcane as feedstock to make renewable energy via Bagasse.
• Inks & Coatings: Using Green and renewable solvents

Quality Measures

An organisation’s credibility comes from its quality. Godavari Biorefineries has ingrained quality in its DNA. “Quality is not just one thing but needs to be looked at as a whole in terms of product quality, process quality, the quality of the facility and the quality of the relationship that the organisation has with the people it works within the company and outside in the community,” said Somaiya.

Apart from a combination of certifications, the company believes in improving quality and productivity from the base level. “We continuously work with our farmers to see how their yield can be improved, ensure their soil is healthier and employ sustainable practices to get higher and good quality yields while improving the farmer’s productivity,” he added.

Sustainability Quotient

The company has been striving to reach sustainability in every aspect of production and functioning. Their work towards water conservations and management and their recent endeavour to reduce water consumption in the facility by half, got them recognition from ICC and FICCI. In a time where every global organisation is striving to achieve high sustainability in their operations, interestingly at Godavari, more than 65% of the inputs come from renewable resources already. “For more sustainability, we are now focusing on the new products and are trying to make them from renewable resources as well. We are also trying to see how we can make our farmers more sustainable in terms of inputs they use in their farm,” explained Somaiya.With various collaborations with agricultural institutions, research organisations, and experts along with farmer education, awareness and participation, the company has been constantly trying to achieve more productivity with less land, chemicals, water and other natural resources are develop solutions to ensure sustainability of agriculture.

Growing Together

An organisation is built by its employees. Moving ahead with over 1,500 people employed by the organisation, Mr. Somaiya believes in going beyond the ordinary. The motto - Earn with a 100 hands and give back with 1,000, is just one way in which company believes in paying back its debt to the society.

“A combination of various factors culminates into making us a company which constantly works towards productivity enhancement. In this process we also try to do a whole social transformation with us. And we have been doing this way before ‘social responsibility’ became a buzz word,” said Somaiya.

Future outlook

The company recently launched three products in the last two years and has over five to seven products in the pipeline to be commissioned in the next 2 to 3 years. These products also have a stream of expansion plans lined up. “We try to make transformation of biomass and this transformation can be chemical, physical, biological or agricultural. Our focus is on expansion of the existing business and introduction of new product lines,” said Somaiya.

The company has a current turnover of over Rs 1,365 crores where over 35 percent of turnover comes from export. These are numbers that quantify a business.

However, it is not the number that is generated in business but the number of lives that are touched that matters more. And the number of lives that Godavari continues to touch is an endless journey.

THE AUTHOR: DEBARATI DAS

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Godavari Biorefineries Limited increases production capacity to 50 million litres per year of fuel grade ethanol up from 15 million litres currently

Godavari Biorefineries Limited has commissioned its expanded facility for dehydrated ethanol (fuel grade) manufacturing at Sameerwadi in Karnataka. With this expansion, the company has the capacity to make 50 million litres per year of fuel grade ethanol, up from 15 million litres currently. The expansion of the fully automated plant using Molecular Sieve Dehydration Technology was completed in 5 Months. The facility will use byproducts of their sugar manufacturing process as raw material.

Godavari Biorefineries Ltd. is a biorefining company producing sugar, biofuels, chemicals, power, compost, waxes, and related products, using sugarcane as the primary feedstock. The company has manufacturing plants at Sameerwadi, Bagalkot district in Karnataka and Sakarwadi, Ahmednagar district in Maharashtra.

Samir Somaiya, Chairman and Managing Director said, "The expansion, is an extension of our strategy to create more value from our renewable stocks. The expansion will help our greater participation in the blending Programme of the Government of India that mandates target of 5 percent blending of bio fuel with petrol.

The company had recently raised private equity from Mandala Capital, a part of which was for the setting up of this plant.

About Godavari Biorefineries Limited

Godavari Biorefineries Ltd., a member of the Somaiya Group, was established in 1939 and is one of the leading companies in the Indian sugar industry. It has sugar, power and chemical plants in Karnataka and Maharashtra. Godavari Biorefineries Ltd. expects a turnover exceeding Rs. 1,200 Crores for the year ended March 2016.

The company undertakes continuous research and innovates for making new products and entering new markets in order to derive maximum value from its feedstock. The company has been pioneers in the making of ethanol based chemicals and is now working on the utilisation of biomass to make a wider variety of products.

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Ahead of what's next

Samir Somaiya, CMD, Godavari Biorefineries, which has entered the branded foods category by introducing the ‘Jivana’ brand for its sugar, salt and turmeric products, speaks to Progressive Grocer about the growth prospects of his products and its plans to expand the reach across markets and consumer segments

Tell us about your foray into the food industry. How did a maker of biofuels and specialty chemicals come into the food business?

Our roots have always been in agriculture. We started in 1939 as a company that processed sugarcane to make sugar. Over time, we also took up the manufacture of ethanol, biofuels, renewable power and chemicals to our product mix. But even now, sugar and agriculture are an important part of our business. We have also been in the business of making salt for many decades now. Recently, we decided to enter the branded foods category by introducing our ‘Jivana’ brand. Our sugar, salt and now turmeric products will be sold under this banner to consumers.

You started with salt and sugar and now into turmeric. Are there any special and particular reasons for getting into these categories?

Sugar and salt have been our ‘bread and butter’ for many decades now. And our products have always been acknowledged in the wholesale market as having good quality. We thought the branding of the same would be a natural extension of our offering. We have always promoted the growing of turmeric among our farmers as a rotation crop and, in some cases, as an inter-crop. In our country, farmers have smaller land holdings, and it is important for them to be able to get good value from their land. Th is crop combination would add value to the farmer’s income. As the programme grew, we naturally thought of buying the turmeric, processing it, and offering high quality turmeric to our ‘Jivana’ consumers. Turmeric is also among the most commonly used spice in most Indian kitchens because of its medicinal properties, which dates back to the ancient Vedic culture of India.

What is special about your products in these categories that sets you apart from your competitors?

We look at our foray into food products in two ways – creating access for farmers and food producers to the retail markets and providing individual consumers with food, which has been grown through sustainable means and is of good quality. This is very important to us. In all the areas that we work in, we maintain a close relationship with our farmers, and work to advance their social and financial sustainability. Our processing is also done in very good facilities, so that the product is hygienically packed, and is pure.

What is it that makes Jivana more appealing to consumers?

Jivana products appeal to the customers as they are of good quality, come in attractive packaging and at a competitive price. These factors ensure consumer trials and repeat purchase for Jivana products.

Which consumer segments and demographics are your products targeted at?

Our target group is decision makers for grocery purchases in Indian homes. In 98% of households, this target group comprises women. We started with branded sugar and salt, and have recently launched turmeric. Since these are the most basic food items in every kitchen, the opportunity for growth is limitless. We aim to be the favoured brand of foods in most if not all Indian kitchens. In recent times, SEC A, B & C homes are seeing an active shift from loose to packaged/branded products and this segment is going to grow exponentially. We are targeting this consumer household. Placements have been done in stores catering to these kinds of homes in metros, mini-metros and class I towns across a few states.

What is the retail presence of your brand in these product categories? 

Jivana is present in general & kirana stores across the states of Maharashtra, Gujarat, Rajasthan, and Karnataka across metros and mini metros and a few class I towns.

What is the consumption pattern, growth rate and market size for your product categories?

Jivana sugar was launched in January 2015, followed by Jivana salt in April 2015. We have seen very encouraging response for a new brand. We have recently been nominated as one of the fastest growing brands of 2015. Turmeric was launched in January 2016.

Sugar sells the most as consumption is the highest. The branded sugar space has few large players and a very large loose sugar market open for capturing. Salt, though a challenging product due to very low costs/margins, is also an amazing product category. Jivana salt has seen good growth as it competes well on price with the market leader TATA and several regional brands across the target cities. An increase in sales will make it more cost effective.

How do you see the demand for these products in the future?

Branded retail foods/ staples is a sector that is going to grow leaps and bounds in the coming years. Consumers are choosing better & safer food options for their homes. Th is translates to choosing packaged/ branded foods over loose. Like water, atta, oil, etc., most commodities will switch to being branded in the next few years. We expect good growth for Jivana sugar and salt, and are also confident about expanding into the spices category.

How do you see the growth trends for your products in urban versus rural areas? 

We are a new brand. The major markets to start with for any new brand would be ones that can bring in the volumes. We have started with metros, mini metros and class I towns and have seen good growth there. Our smaller SKUs are seeing good response in smaller towns too. Our plan is to have a systematic growth plan for both urban and rural areas.

What are your plans for strengthening the market share and consumer reach of your products?

Our promise is “purity in foods”. The aim is to provide good quality foods for Indian homes and that will remain our primary focus. Jivana Foods would be synonyms with purity, quality and consistency at all times. To strengthen market share and reach, aggressive placements are the first step followed by a clever marketing plan, as also relationship building with our channel partners and retailers. All these together will ensure our sustained growth.

Which are important factors for the retail pick up of products?

Good quality of products, aggressive placements, right price and effective promotions/ retail schemes will ensure that Jivana is purchased repeatedly.

What is your strategy for retail outreach?

Jivana comes from The Somaiya Group, a company known for its honesty, strong values and a will to uplift the community. Our strategy is simple – to make and retail foods that we want our country to eat and flourish with. Basic foods like sugar, salt and spices are bought from the neighbouring grocer so it is very important to be present there. The sheer number of retail/ kirana outlets bring in the volumes and reach. Visibility in modern retail is also important, so being present in the Big Bazaars, D-Marts and Reliance stores, etc., is also imperative. We believe that good quality products are the first stepping stone to building sales, followed by aggressive placements, good promotions for the retailers as well as consumers.

As a young brand, what do you think will be the challenges in distribution?

Price sensitive commodity brands, despite having a good distribution, can be quickly replaced by competitive brands. Th e challenge in distribution is to be present on the retail shelf each time. Distribution is cost intensive and there is high attrition in sales, which can be minimised by creating volumes and a good incentive structure.

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Godavari Biorefineries Ltd. launches ‘Jivana Turmeric’

Godavari Biorefineries Ltd. has entered the spices category under its food brand ‘Jivana’.Godavari Biorefineries Ltd. launches Jivana Turmeric after their successful foray with Jivana Classic Sugar, and Jivana Refined Iodised Salt.

Jivana turmeric is hygienic, pure, and rich in colour, flavor and texture with freshness intact.It stimulates protein digestion, and is an excellent blood purifier. The packages are available in 50gms, 100gms, 200gmsto cater to the demands of various segments. It will be available in Maharashtra, Gujarat, Rajasthan and Karnataka.The turmeric is finely packed in high quality packaging material such that it maintains its freshness and nutritional value.
Jivana turmeric is manufactured and packed in Bisnal Village, Bagalkot

Speaking on the launch`Jivana Turmeric', “Mr. Samir Somaiya,CMD Godavari Biorefineries, said the company has come out with two productsJivana Sugar, andJivana refined iodised salt which are the two most basic ingredients used by the Indian housewives in their cooking.The company has gained valuable experience in the foods segment after the launch of `Jivana Salt and Jivana Sugar' and the entry into spices segment was a natural extension of the foray into the market”

About Godavari Biorefineries Ltd
Godavari Biorefineries Ltd is one of India’s leading and sustainable company producing sugar, other foods, biofuels, chemicals, power, compost, waxes, and related products, using sugarcane as the primary feedstock. Our aim is to engage in research and innovate by continuously making new products and entering new markets in order to derive the maximum value from our feedstock. Our research areas include sustainable farming, transformation of biomass (chemical, mechanical and biological), product development, and process optimization. Founded in 1939, we have been pioneers in the growing, processing, and utilization of biomass to make a wide variety of products.

We are now working on the next generation bagasse-based bio refinery and also the biotransformation of sugar to biopolymers.

For more information, email at: consumercare@somaiya.com or call on: 022-61702111
For more information, please visit: www.somaiya.com

For media queries: aarohancommunications2@gmail.com
Tel: Meera: 9821156976/ Shirin: 9769229595

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61st ANNUAL GET-TOGETHER OF ISCMA

The Indian Speciality Chemicals Manufacturer’ Association (ISCMA) organised its 61^st Annual get-together on 10^th October 2015 at Mumbai, attended by the industry captains, invitees, members and media.

Speaking at the event, Mr. Deepak Bhimani, President, ISCMA, said reforms like cut in the base rate of interest has now started and the roll-out of GST would hopefully be effective by April 2016. He stressed the need for the chemical industry to innovate continuously to avoid obsolescence, and leverage the low average monthly wages, which at about $407 are far below $10,210 in a typical pharma industry in the USA. He stressed the relevance of solar energy, enzymes, catalysts and fermentation technology, etc.

Infrastructure development

Mr. Samir Somaiya, Guest of Honour and Chairman & Managing Director, Godavari Biorefineries Ltd. (GBL), spoke on innovation and sustainability to maximize profits. GBL, which derives feedstock from sugarcane farmers, ensures that all stake-holders, work in sustainable, collaborative partnerships.

The company is involved in making commodity chemicals like sugar, ethanol & ethanol-based chemicals, including ethyl acetate, and renewable power. “Knowledge should be a key differentiator,” he observed, in the transformation of biomass – physically, chemically and biologically. Instead of burning bagasse to generate power, the company is currently involved in a process to physically transform the bio-resource into cellulose, upgrade it, and convert into cellulose derivatives and micro-crystalline cellulose. Recently the company has put up two aldehyde plants, and the products find markets globally in the fragrance & flavor and cosmetic industries.

GBL is also investigating the possibility of making solvents and bio-degradable biopolymers from renewable resources. “These are opportunities because the world is struggling with waste,” Mr. Somaiya noted, adding that it is possible to innovate only if one is tenacious and goes after an idea relentlessly.

He also addressed the importance of the social bottom line – the “earn and give” philosophy of the group’s Founder through the creation of educational and healthcare institutions.

For more information, please visit: www.somaiya.com

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Sustainability Yeilds Sweet Success

BASIC ECONOMICS TEACHES that companies exist to maximize their profits. Godavari Biorefineries, an Indian producer of sugar, ethanol, and biobased chemicals, didn’t get that memo. Its managers appear focused as much on philanthropy and sustainability as they are on generating a financial surplus every year.

It’s an unconventional approach that is working for the firm. Sales at the 76-year-old company have risen steadily from $160 million in 2010 to $202 million last year, according to a recent financial report. Investors seem to like what they see. Godavari succeeded in securing a $15 million cash injection last month from a private equity fund.

Godavari is an unusual company. On the one hand, it does business in the standard way of producing price-competitive materials at large, integrated complexes. On the other hand, it funds medical services and the education of young people in the communities where it operates and also lends money to farmers that supply it with sugarcane.

“We have a strong sense of social mission that started with my grandfather, who was born poor,” says Samir Somaiya, Godavari’s third-generation chairman and managing director. “We take a very long-term perspective to business.”

The company was founded in 1939, when the elder Somaiya, after enjoying some success as a sugar trader, decided to start up his own sugar mill. In the decades that followed, Godavari’s business thrived, partly because it was protected by Indian import tariffs. When his grandson Samir Somaiya joined the company, those tariffs were in the process of being dismantled. The company had to close plants, a trauma that has guided Somaiya’s decision-making ever since.

“I decided to never rely again on tariff protection,” Samir Somaiya says. He went further than that, reorganizing the business so success doesn’t depend on any specific set of conditions. “We don’t want to be vulnerable to any technology, any one process, any customer,” Somaiya says.

India is a major sugar exporter, and Godavari is one of India’s major sugar refiners. Under Somaiya, a basic tenet has been to extract more value out of sugarcane farming. Starting with sugarcane, Godavari refines sugar, ferments ethanol, and derives an ever-expanding range of biochemicals. From plantation waste, it extracts energy at cogeneration plants that are integrated with its mills and chemical plants.

Ethanol is Godavari’s starting point for a family of downstream chemicals. It converts ethanol into acetaldehyde and then acetic acid. From there it produces derivatives such as ethyl acetate, crotonaldehyde, 1,3-butanediol, and flavor and fragrance ingredients. The company calls itself one of the world’s top 10 producers of ethyl acetate, and it exports more than two-thirds of the chemicals it makes. With the launch of new biochemicals and the commissioning of more power generation capacity this year, the company expects its sales to surge by 25% to $250 million.

IT’S UNUSUAL for a major biobased chemical maker to emerge from the sugar business, according to Sarah Hickingbottom, business development manager for oleo- and biochemicals at LMC International, a consulting firm based in Oxford, England. Most biochemical firms own a specific technology they use to produce chemicals from purchased feedstock. Or they are chemical companies that modify a petrochemical process to use a biobased feedstock instead.

But as the biobased chemical business matures, access to competitive feedstock may win the day, Hickingbottom predicts. Production processes in this relatively new business will eventually become standardized. When that happens, having access to cheap raw materials will be key.

As a major sugar exporter, India is advantaged, Hickingbottom says. But the country’s output varies from year to year, she notes. In poor harvest years, companies that maintain close relations with local sugarcane growers will likely be in a better position to secure raw materials. In that context, it’s possible that Godavari’s philanthropic bent may help the company businesswise, even if that wasn’t the point. Paul S. Zorner, an American member of Godavari’s board who has worked at and advised dozens of biobased fuel and chemical companies, notes that the firm helps fund the studies of thousands of young people in the communities where it operates. Godavari also loans money, when the need arises, to the 20,000 or so farming families that supply it with sugarcane.

According to Somaiya, several family foundations that he chairs pay for the education of 35,000 students in communities where Godavari operates. They also fund a 500-bed hospital and a rural health center.

Zorner first met Somaiya at a conference on sugar in South Africa. He has now been on Godavari’s board for seven years because the two men share similar ideas about how to extract value from sugar. The company’s manufacturing operations are highly efficient, Zorner claims. “Godavari’s plants have a very good scale and are well engineered both chemically and mechanically,” he says. “The only thing that is wasted is CO2, really.” Godavari was able to achieve this efficiency thanks to India’s abundance of engineering talent, he adds.

IN FACT, the company’s biobased chemicals are produced so efficiently that they compete pricewise against identical products obtained from petrochemical sources. There was a time when companies expected to receive a premium for renewably sourced chemicals, but according to Zorner, it’s a rare case when that happens.

Even without a price premium, at least one investor sees opportunity in Godavari’s focus on products from renewable sources. The Mauritius-based private equity fund Mandala Capital last month agreed to inject $15 million in Godavari. The cash will help to support product development and pay for a new specialty chemical plant. Mandala didn’t respond to a request for comment for this article, but in an earlier statement, the firm said it endorsed Godavari’s strategy of getting more value from sugar.

The academic world also sees value in Godavari’s approach. Somaiya teaches a one-month chemical engineering course on biorefining every two years at Cornell University. More broadly, Zorner says, Godavari can serve as an inspiration to the many parts of the world that have strong agricultural sectors but little industry. “It just shows what you can accomplish with the sun, water, and some manpower.”

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Godavari Biorefineries Limited Launched its New Chemical Plant

Godavari Biorefineries Limited inaugurated its new MPO plant with a capacity of 4,000 tons per annum, at Sakarwadi in Maharashtra. 

Godavari Biorefineries Ltd. is a biorefining company producing sugar, biofuels, chemicals, power, compost, waxes, and related products, using sugarcane as the primary feedstock.  The company has manufacturing plants at Sameerwadi, Bagalkot district in Karnataka and Sakarwadi, Ahmednagar district in Maharashtra.

Inaugurating the plant, Shri Prakash Mehta, Minister of Housing, Labour & Mines, Guardian Minister of Raigad District, Government of Maharashtra, said, “The development of this plant will contribute to the socio-economic development of the area. The commitment of the company for this region began with Karamshibhai Somaiya when he founded the company here and this became his Karmabhoomi. From the past 76 years, the company has worked for the development of this area”.

Samir Somaiya, Chairman and Managing Director said, “The new unit will allow us to offer customized chemicals and solutions for the global markets. It is part of our strategy to meet the growing demand for chemicals manufactured from renewable feedstocks using sustainable practices”.

The company had recently raised private equity from Mandala Capital, a part of which was for the setting up of this plant.

About Godavari Biorefineries Limited

Godavari Biorefineries Ltd., a member of the Somaiya Group, was established in 1939 and is one of the leading companies in the Indian sugar industry.  It has sugar, power and chemical plants in Karnataka and Maharashtra. Godavari Biorefineries Ltd. expects a turnover exceeding Rs. 1,200 Crores for the year ended March 2016.

The company undertakes continuous research and innovates for making new products and entering new markets in order to derive maximum value from its feedstock. The company has been pioneers in the making of ethanol based chemicals and is now working on the utilisation of biomass to make a wider variety of products.

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A Bitter Harvest

Correct the mismatch in pricing and save the sugar industry

It is a super industry, and we need to look at it from an advantageous point of view:

• Millions of farmers grow cane in large areas of the country
• Cane is among the most remunerative crops for them (if policy is good),   and also hardy (it can with stand drought and flood better than many).
• India is the largest consumer of sugar in the world.
• From cane, a variety of by-products such as ethanol and power can be produced.

The problem that the sugar industry faces is one of oversupply of cane. This is primarily due to high announced prices (fair and remunerative price or FRP) and returns. Any farmer faced with a good price pronouncement of cane will plant more. This then leads to an oversupply of sugar, which will automatically depress the price of sugar. Prices need to be based on economics, and only then will this mismatch be corrected. Thus, sugar prices are low, and cane prices are high, making the payment of cane price, the FRP impossible. And this will not change, unless this mismatch is corrected.

In recommending the FRP, the CACP (Commission for Agricultural Costs and Prices) had suggested the cane price, with the proviso, that if the frp was higher than the economically linked Rangarajan formula (this price links the price of cane to the price of sugar, molasses and bagasse), then the difference should be met by the government, through some stabilisation fund. The government announced the FRP by only looking at FRP number, and overlooked the suggestion of the price difference. So, one option is for the government to pay this difference.

The other approach is to create demand. This can be done by:

• Buying sugar for a ‘strategic reserve’. This can work once or twice, but a long-term natural demand must be created.
• The government should give a subsidy for exporting sugar (raw, white or refined). A subsidy for raw sugar was announced, but at the end of the season, so by the time the price was announced, the season was almost over, and the raw price had fallen.
• Creating a programme that encourages the use of sugarcane for production of ethanol, biochemicals, sugarcane for production of ethanol, biochemicals, or even electricity, so that mills have alternate revenue streams, as well as options to put their surplus sugar. The government has just announced an excise exemption for ethanol used in fuel, this is good. Policies can be examined for examining the same for bio-refineries, and also giving good prices for power through the implementation of recs (many states such as Karnataka, are not following the recommendations of CERC for RECs).

Further, since sugarcane pricing will always be politically sensitive sugar prices will always have to be protected by high import duty. Not because the industry needs protection, but because the cane price, and therefore the farmer, needs protection. The recent policy measures raising import duty, etc, are good in the long run, as an insurance against Brazilian or international low prices.

It is best to follow the Rangarajan formula – linking the price of sugarcane to sugar, molasses and bagasse – the primary by-products. This is done in Brazil, Thailand, and almost everywhere else.

The high prices of cane, those too high to pay, result in some farmers getting a very high price, and some get nothing. This leads to poverty and a crisis. This is industry provides employment to lakhs of people and even many more million farmers.

The author is chairman and managing director, Godavari Biorefineries Limited.

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