A Study On “FINANCIAL STATEMENT ANALYSIS” With reference to NCS SUGARS LIMITED LATCHAYYAPETA, SEETHANAGARAM, VIZIANAGARAM A Project Report submitted to Andhra University, Visakhapatnam In Partial fulfillment for the Award of the Degree of MASTER OF BUSINESS ADMINISTRATION Submitted by M.PRASADA RAO (Regd. No: 111228802066) Under the Esteemed guidance of Mr.N.K.MAHESH Asst. Professor Department of Management Studies 1
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A Study On
“FINANCIAL STATEMENT ANALYSIS”
With reference to
NCS SUGARS LIMITED
LATCHAYYAPETA, SEETHANAGARAM, VIZIANAGARAM
A Project Report submitted to Andhra University, Visakhapatnam
In Partial fulfillment for the Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
M.PRASADA RAO
(Regd. No: 111228802066)
Under the Esteemed guidance of
Mr.N.K.MAHESH
Asst. Professor
Department of Management Studies
Dr. LANKAPALLI BULLAYYA P.G. COLLEGE
Andhra University
Visakhapatnam-530003
(2011 – 2013)
1
2
DECLARATION
I here by declare that this project work entitled “A Study on financial statement
analysis” with reference to N C S Sugars Limited, Seethanagaram, is a bonafide work done
by me for the award of the degree of “Master of Business Administration”(MBA), from
Andhra University, done under guidance of Mr.N.K.MAHESH, Assistant Professor,
Department of Management Studies, during the academic years 2011-2013 and has not been
submitted to any other University or Institution for the award of any Degree or Diploma
Date: M.PRASADA RAO
Place: Visakhapatnam Regd . No 111228802066
3
CERTIFICATE
This is to certify that the project work entitled “A Study on financial statement
analysis” with reference to N C S Sugars Limited, Seethanagaram, is a bonafide work done
by M. PRASADA RAO a student of MBA, Department of Management Studies, Dr.
Lankapalli Bullayya PG College, Visakhapatnam, for the award of the degree of “Master of
Business Administration”(MBA)from Andhra University, under my guidance, during the
academic years2011-2013.
Place: Visakhapatnam N.K.MAHESH
Date: Asst. professor & Project guide
Dept of Management Studies
Dr.Lankapalli Bullayya PG College
Visakhapatnam
Dr. R.V.H SRIKANTH
Head of the Dept, Dept of Management Studies
Dr.Lankapalli Bullayya PG College
Visakhapatnam
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ACKNOWLEDGEMENT
It is great pleasure to take the opportunity to acknowledge and express my gratitude to all
those who helped me throughout my project
First and foremost, I thankful to Prof. K.V.S. PATNAIK, Director Dr.Lakapalli Bullayya
P G College, Management Studies ,Dr.G.S.K. CHAKRAVARTY, Dean, Management Studies.
Dr. Lankapalli Bullayya P G College, for giving me permission for taking up my project work.
I also thank Dr. R.V.H.SRIKANTH, Head of the Department, Dr .Lankapalli Bullayya P G
College, for giving me the opportunity to take up my project work and helping me out
throughout.
I would also like to thank Mr.N.K.MAHESH, Asst Professor, Department of
Management Studies, for his valuable guidance and support for the completion of my project
work.
I would like to express my sincere gratitude to the management and staff of N C S
Sugars Limited, Seethanagaram for giving me permission to do my project work in their
organization and helping me meticulously in all the aspects of my project work.
Finally I would also like to thank all my staff members in the Department of Management
Studies, Dr. Lankapalli Bullayya P G College, for their enduring support throughout my MBA
Programme.
(M.PRASADA RAO)
Date:
Place : Visakhapatnam.
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CONTENTS
PAGE NO:
CHAPTER 1 1-15
INTRODUCTION
CHAPTER 2 16-35
INDUSTRY PROFILE
CHAPTER 3 36-49
COMPANY PROFILE
CHAPTER 4 5O-72
THEORETICAL FRAME WORK
CHAPTER 5 73-111
DATA ANALYSIS AND INTERPRETATION
CHAPTER 6 112-114
SUMMARY
FINDINGS
SUGGESTION
BIBLIOGRAPHY
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CHAPTER – I
INTRODUCTION
7
INTRODUCTION
Accounting process involved recording, classifying and summarizing various business
transactions. The aim of maintaining various records is to determine profitability of the
enterprise from operation of the business and also to find out is financial position. Financial
statements are in term reports, presented annually and reflect a division of the life of an
enterprise in to more or less arbitrary accounting period more frequently a year. Financial
analysis is the process of identifying the financial strength and weakness of the firm by properly
establishing between the items of the balance sheet and profit and loss account.
There are various methods or techniques used in analysis financial statements such as
comparative statements, trend analysis, common size statements, schedule of changes in working
capital, funds flow and cash flow analysis – Cost Volume Profit Analysis and Ratio Analysis.
According to American accounting association “accounting is the process of identifying
measuring and communication economic information to permit informed judgments and decision
by the mass of information”. It involves identification of the transaction in financial character to
be express in monetary terms, recording of such transaction in the book of original entry in the
chronological order, posting the entries of books of original entry to the appropriate accounts in
the ledger, balancing of accounts preparation of trial balance to conform the arithmetical
accuracy of the accounts so prepared and preparation of final accounts, popularly referred to a
financial statement.
Financial management is planning, organizing, directing and controlling various financial
activities of the organization. In order to perform all the managerial functions effectively and
efficiently, sufficient past and present information about the firm and its operations should be
equipped along with their changes overtime, and this financial information can be derived from
the basic financial statements.
A substantial portion of information required in financial decision making is found in
financial statements, particularly, the income statement and the balance sheet. Financial
statements help in forecasting the financial effects of planning.
8
Analysis of financial statements refers to the process of the critical examination of the financial
information contained in the financial statements. The process of dissection, establishing
relationships and interpretation thereof to understand the working and financial position of a firm
is termed as the analysis of financial statements. Even it is a process of establishing and
identifying the financial weaknesses and strength of the firm.
Financial management is that managerial activity which is concerned with planning and
controlling of the firm’s financial resources.
Financial management in a broad sense provides a conceptual analytical framework for
financial decision making which covers both acquisitions of funds as well as their allocation.
Thus, apart from the issues involved in acquiring external funds, the main concern of financial
management is the efficient and wise allocation of funds to various users, defined in a broad
sense, it is viewed as an integral part of overall management.
Financial analysis is the process of identifying the financial strengths and weaknesses of
the firm by properly establishing relationship between the items of the balance sheet and the
profit and loss account. The financial analysis can be undertaken by management of firm or by
parties outside the firm viz., owners., creditors , investors and others.
It is the process of analyzing financial performance of a company in a systematic manner.
There are many tools of the financial analysis is viz; Ratio analysis, funds flow analysis, cash
flow analysis, common size statement, CVP analysis etc. Out of all the techniques of financial
analysis ratio analysis is a very popular technique.
9
NEED FOR THE STUDY
Need for the study includes the following:
Financial statements are an important source of information for evaluating the
performance and prospects of a firm.
If properly analysis and interpreted, financial statements can provide valuable insights
into a firm’s performance.
Financial statement analysis may be done for a variety of purposes, which may range
from a simple analysis of the short-term liquidity position of the firm to a
comprehensive assessment of the strengths and weakness of the firm in various areas.
It is helpful in assessing corporate excellence, judging creditworthiness, forecasting
bond ratings, evaluating intrinsic assessing market risk.
What is the financial position of a firm at a given point of time? How has the firm
performed financially over a given period of time? What has been the sources and
uses of cash over a given period? To answer these questions these analysis is very
useful to us.
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SCOPE OF FINANCIAL STATEMENT ANALYSIS
The study is totally included in finance. So the finance scope wide the scope of the study
understand below points
1. The study is confined to seethanagaram area.
2. The study as done only in financial department.
3. The study is only concentrated on ratio analysis.
4. The study only depended on printed balance sheets.
5. The study confined only on financial activities.
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MEANINGS AND DEFINITIONS
The terms ‘financial analysis’ also known as analysis and interpretation of financial
statements refers to the process of determining financial strength and weaknesses of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss account
and other operative data
According to John N.Myer “The financial statements provide a summary of the accounts
of a business enterprise, the balance sheet reflecting the assets, liabilities, and capital as on a
certain date and the income statement showing the results of operations during a certain period”.
The term financial statement generally refers to following basic statements:
The income Statement.
The Balance Sheet.
A Statement of Retained earring.
A Statement of Changes in financial position.
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NATURE
The financial statements are prepared on the basis of recorded facts. The recorded facts
are those which can be expressed in monetary terms. The statements are prepared for a
particular period, generally one year. The transactions are recorded in a chronological order as
and when the events happen. The financial statements by nature are summaries of the items
recorded in the business and there statements are prepared periodically generally for the
accounting period.
The following points explain the nature of financial statements:
Recorded Facts:
The term ‘Recorded facts; refers to the data taken out from the accounting records.
The records are maintained on the basis of actual cost data. The figures of various accounts such
as cash in hand, cash at bank, bills receivables, Sundry debtors, fixed assets are taken as per the
figure recorded in the accounting books. As the recorded facts are not based on replacement
costs the financial statements do not show current financial condition of the concern.
Accounting Conversions:
Certain accounting converters are followed while preparing financial statements.
The conversion of valuating inventory at cost or market price, whichever is lower, is followed.
The valuing of assets at cost less depreciation principle for balance sheet purposes statements
comparable, simple and realistic. The accountants make certain assumption while making
accounting records. One of these assumptions is that the enterprise is treated as a going concern.
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IMPORTANCE
Financial statements contain a lot of useful and valuable information regarding
profitability financial position and future prospective of business concern.
The utility of financial statement to different parties may be summarized as follows:
1. Management:
The financial statements are useful for assessing the efficiency of different cost
centers. The management is able to decide the course of action to be adopted in future.
2. Creditors:
The trade creditors are to be paid in a short period. The CRS will be interested in current
solvency of the concerns. The calculations of current ratio and liquid ratio will enable the
creditors to assess the current financial position of the concerns in relation to their debts.
3. Investors:
The investors include both short-term and long term investors. They are interested in the
security of the principal amounts of loan and regular payments by the concern. The investors
will not only analyze the parent financial position but will also study the future prospectus and
expansion plans of the concern.
4. Government:
The financial statements are used assess tax liability of business enterprises. The
Government studies economic situation of the country from these statements. These statements
enable the government to find out whether business is following various rules and regulations or
not.
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OBJECTIVES
Goals financial statements are supposed to accomplish. The intent of financial
statements is to provide information useful in economic decision making. In
particular, the data should be useful in making investment and credit decisions
Financial statements should provide a reliable indication of a company's financial
position, operating results, and changes in financial position. Also, statement
components and categories should aid in decisions.
Financial statements may provide information in addition to that specified by
authoritative requirements and regulatory groups
.Inasmuch as management knows the most about the business, it is encouraged to
identify certain circumstances and explain their financial effects on the enterprise
.
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ADVANTAGES
There are various advantages of financial statements analysis.
o The major benefits that the investors get enough idea to decide about the
investments of their foundation the specific company.
o Secondly, regulatory authorities like International Accounting Standards Board
can ensure whether the company is following accounting standards or not.
o Thirdly, financial statements analysis can help the government agencies to analyze
the taxation due to the company.
o Moreover, company can analyze its own performance over the period of time
through financial statement analysis.
o Simplifies financial statements ratio analysis simplifies the comprehension of
financial statements. Ratios tell the whole store of changes in the financial
conditions of the business
o Facilitates inter – firm comparison ratio analysis provides data for inter-firm
comparison. Ratios highlight the factor associated with successful and un
successful firms. They also reveal strong firms and weak firms, over-valued and
under-valued firms.
o Makes intra-firm comparison possible ratio analysis also makes possible
comparison of the performance of the different divisions of the firms. The ratios
are helpful in deciding about their efficiency or otherwise in the past and likely
performance in the future.
o Helps in planning ratio analysis helps in planning and forecasting. Over a period
of time, a firm or industry develops certain norms that may indicate future success
or failure.16
LIMITATIONS
Financial statements are relevant and useful for the concern, still they do not
present a final picture of the concern, and otherwise misleading conclusions may be drawn. The
financial statements suffer from following limitation:
1. Ignoring of non-monetary aspects:
These statements are prepared with the help of accounting information which mainly
consider monetary aspects only. The value of business depends both on qualitative and
quantitative factors.
2. Historical cost:
The statements are prepared on the basis of historical cost. The values of fixed assets
are at there original cost less depreciation. The balance sheet value are not shown the value
of assets may be sold more over they do not reflect the market value which is as important
factor in determining the solvency of an enterprise.
3. Personal Judgment:
In preparing financial statements certain items are left to the personal Judgment of
the accountant. If any accountant is not following accounting principles correctly his
judgment will give wrong picture.
4. Conversion of Conservation:
Due to conversion of conservation the income statement may not disclose true income
of the business. This is due to ignorance of probable incomes and accounting probable
losses.
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COMPANY PROFILE
NCS Sugars Limited, the flag ship company of the NCS Group of Companies, was
incorporated on the 6th June, 2002. NCS Sugars Limited is one of the sugar factories of the
erstwhile Nizam Sugars Limited, a state-owned sugar factory, acquired by the NCS Group.
Latchayyapeta unit is one of the sugar mills operated and owned by NSL. It was set up in the
year 1995 with a crushing capacity of 2500 TCD by replacing two units at Bobilli (850 TCD) and
Seethanagaram (600 TCD) that had been taken over by Government of AP in 1986. The Sugar
Mill is located in the eastern part of AP about 800 Km north east of Hyderabad and 1 Km to the
north of the Village of Latchayyapeta. It is 6 KM from Bobilli, a town with a population of
75000, in Seethanagaram Mandal, Vizianagaram dist A.P.
Latchayyapeta has good transport facilities. It is located 115 km north of the airport and
is one of India’s major seaports at the city of Visakhapatnam .Latchayyapeta is the principal
industrial employer in the region. The factory operations under the new management of NCS
Sugars had commenced on 17th January 2003.
The plant has been allotted a zone of about 43000 acres of agricultural land consisting 17
mandals, 820 villages and about 22 000 potential farmers in the zone. The major thrust is given
for cane development and uplifting farmers’ living standards by increasing their per capita
income. This in turn will result in sufficient quantity of cane needed for optimum utilization of
our facility to crush up to 6000 MT per day, during the seasons.
The existing potential for cane production and supply is of the order of 3.5 to 4 lakhs mt.
Cane development programmes, irrigation and use of organic and / or chemical agents could
increase both the acreage and yield and supply an additional 50-65,000 mt in a short time
horizon. This level of supply would sustain the 2500 TCD plant at Latchayyapeta, allowing for
10% of total production to be retained for seed and 1% for household use by cane growers. The
company completed 1st year of operations on 30th April 2003 with sugarcane crushing of 2.25
lakhs MT. With a growth that consistently established, now NCS Sugars Limited is a full fledged
sugar manufacturing unit with the state- of – art technology managed by a crew of professionals
from various capacities, poising towards a crushing capacity up to 6000 TCD.
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NCS Sugars Limited is the first company to import Raw Sugar to India for the first time
during 2004-05 and processed into white sugar, which has predominantly compensated the
domestic need as well. Thus, NCS has changed the Sugar Manufacturing business from seasonal
to throughout the year.
NCS Sugars Limited has also ventured into co-generation of power up to 20MV, by using
the bagasse from the sugar unit, which is an eco-friendly venture that could take care of the
electricity requirements of AP TRANSCO. This is the FIRST Sugar Factory to have associated
with 22000 farmers covering half the district of Vizianagaram.
ACHIEVEMENTS AND AWARDS:
The Best Cane Development award for 2007, presented in R & D workshop at
Vijayawada by Acharya NG Ranga Agricultural University & Commissioner ate
of sugar, Government of Andhra Pradesh.
2nd place in Best Cane Development Award by SISSTA-2007.
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OBJECTIVES OF THE STUDY
The study has been undertaken with the following specifics objectives.
To review the Sugar Industry in India with reference to NCS Sugars Ltd.
To describe the significance of financial statement analysis for measuring financial Performance.
To compare the financial performance of NCS Sugars Ltd. over the years by using Different
financial statements analysis techniques.
To summarize and to suggest strategies for the better financial performance of NCS Sugars Ltd
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RESEARCH METHODOLOGY
Methodology is a systematic procedure of collecting information in order to analyze
and verify a phenomenon. The collection of information is done two principle sources. They
are as follows:
Primary Data
Secondary Data
Primary data
It is the information collected directly with out any references. In this study it is
gathered through interviews with concerned officers and staff, either individually or
collectively, sum of the information has been verified or supplemented with personal
observation conducting personal interviews with the concerned officers of finance department
of NCS Sugars Ltd
Secondary data
The secondary data was collected from already published sources such as, pamphlets of
annual reports, returns and internal records, reference from textbooks and journals relating to
financial management.
The data collection includes.
a. Collection of required data from annual records of NCS Sugars Ltd
b. Reference from textbooks and journals relating to financial management.
21
LIMITATIONS OF THE STUDY
Financial analysis is a powerful mechanism of determining financial strengths and
weakness of a firm. But they analysis is based on the information available in the financial
statements. Thus, the financial analysis suffer from serious inherent.
Some important limitations are:-
Since the procedure and policies of the company will not allow to disclose confidential
financial information, the project has to be completed with the available data given to us.
The study is carried basing on the information and documents provided by the
organization and based on the interaction with the various employees of the respective
departments.
There was no scope of gathering current information, as the auditing has not been done by
the time of project work.
Financial analysis is based upon only monetary information and non-monetary factors are
ignored.
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CHAPTER-II
INDUSTRY PROFILE
23
INDUSTRY PROFILE
India has been as the original home of sugarcane and sugar. Indians knew the art of
making sugar since the fourth century. However the advent of modern sugar industry in India
dates back to mid 1930’s when a few vacuum pan units were established in the tropical belts of
Uttar Pradesh and Bihar.
The Sugar industry is predominantly localized in Uttar Pradesh, particularly in the
districts of Meerut, Saharanpur, Bijnour, Bereilly, Muzaffarnagar, Moradabad, Bihar and in the
eastern coastal districts of Andhra Pradesh. If we refer to the historical events in the Sphere of
Sugar Industry, Uttar Pradesh and Bihar occupied the predominant position as far as the location
pattern of the industry is concerned and still these States are enjoying the same position. The
reasons for such heavy concentration in the States of Utter Pradesh and Bihar are manifold. The
unique position which Utter Pradesh enjoys in respect of cane cultivation is due to the advantages
conferred by the rich and fertile alluvial soil of the Genetic plain, the bulk of which contains
adequate quantities of lime and potash, the presence of thin varieties of cane admirably suited to
the climate conditions of the region and the existence of cheap and extensive irrigation facilities.
The concentration of sugarcane crop in compact blocks enables the sugar factories to get supplies
of sugarcane direct from the fields. Moreover, the cost of the cane cultivation is less and the
cultivators are not accustomed to raise alternative crops like groundnuts, chilies, plantains, etc.
In recent years the sugar industry spreading to other parts of India, notably in the southern
states on Maharastra, Karnataka, Andhra Pradesh and so on. Since sugar mills got to be near the
sugar fields, Sugar mills are getting established near places where Sugarcane can be and is
grown. Also, the consumption of sugar is widespread and sugar is demanded practically in all
areas. And, therefore there is in recent year’s tendency in the case of sugar industry towards its
dispersal in different parts of the country.
India is the largest consumer and second largest producer of sugar in the world.
The sufficient and well distributed monsoon rains, rapid population growth and substantial
increases in sugar production capacity have combined to make India the largest consumer and
second largest producer of sugar in the world.
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The Indian Sugar industry has not only achieved the singular distinction of being one of
the largest producer of white plantation crystal sugar in the world but has also turned out to be a
massive enterprise of gigantic dimensions. With over 516 sugar factories located throughout the
country, the sugar industry is amongst the largest agro processing industries, with an annual
turnover of Rs150bn. It plays a major role in rural development and its importance for India
stretches far beyond the role of a sweetener supplier.
The Sugar factories located in various parts of the country work as nuclei for
development of rural areas by mobilizing rural resources and generating employment, transport
and communication facilities. Over 45mn farmers, their dependants and a large mass of
agricultural labor are involved in sugarcane cultivation, harvesting and ancillary activities
constituting 7.5% of the rural population.
The sugar industry employs over 0.5mn skilled and unskilled workmen, mostly from the
rural areas.
Since the beginning of planning era, sugar industry operated under a policy of partial
control in 1950-51 and 1951-52, followed by a continuous period of six years of decontrol
between 1952-53 and 1957-58. This policy was followed under the pragmatic leadership of the
Minister of Food, Sri Rafi Ahmed Kidwai. However, with his departure, the perception of
decontrol was lost.
After altering between control and the Government adopted the policy of partial decontrol
in 1967-68, which has since been the mainstay of Government policy except for two short
periods of decontrol in the 1970’s. Under this policy, the Government procures 40% of
production at controlled prices based on the Statutory Minimum price for sugarcane, for supply
through the Public Distribution System and the balance 60 % is allowed to be sold by the mills in
free market subject to the monthly release mechanism. The details of past Government policies
for sugar industry are provided in annexure 1.
The levy quota for sugar mills has been brought down from the peak levels of 70% in
1968-69 to the present levels of 40% as a gradual process of deregulation of sugar industry.
The number of operating sugar mills in the country has increased from 29 in sugar year
(SY) 1930-31 to 412 by 1996-97 (sugar year = October 1st to September 30th). The addition in
number of mills was at its peak during seventies when nearly 100 mills were added between 2007
25
and 2008 to increase the number of operating units to 516. The development of industry in the
past is as given in table below.
CENSUS OF SUGAR MILLS AND CRUSHING ACTIVITY IN INDIA
Sugar year
(oct-sept)
Number of operating
Sugar mills
Average capacity ton
Crushed per day
1930-31 29 644
1940-41 148 750
1950-51 139 882
1960-61 174 1172
1970-71 215 1394
1980-81 315 1718
1990-91 385 2088
1996-97 412 2656
2000-01 423 3000
2003-04 453 3200
2006-07 504 3561
2007-08 516 3586
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SUGARCANE IN THE WORLD
COUNTRY AREA
(Million ha)
PRODUCTION
(Million tons)
PRODUCTIVITY
(Tons/ha)
BRAZILL 5.343 3865.2 72.3
INDIA 4.608 289.6 62.8
CHINA 1.328 92.3 65.5
THAILAND 0.970 64.4 66.4
PAKISTAN 1.086 52.0 47.9
MEXICO 0.639 45.1 70.6
COLOMBIA 0.435 36.6 84.1
AUSTRALIA 0.423 36.0 85.1
USA 0.404 31.3 77.5
PHILIPPINES 0.385 25.8 67.1
INDONESIA 0.350 25.6 783.1
CUBA 0.654 22.9 35.0
SOUTH AFRICA 0.325 20.6 63.4
ARGENTINA 0.295 19.2 65.2
MYANMAR 0.165 7.5 45.4
BANGLADESH 0.166 6.38 41.2
TOTAL 20.42 1333.2 65.2
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Significance of Sugar industry
Sugarcane and sugar beet are two main sources of white crystal sugar in the world. Out of
the world’s total white crystal sugar production about 70% comes from sugarcane and 30% from
sugar beet. More than 100 countries in the world cultivate sugarcane while 35 countries produce
sugar from sugar beet. About 12 countries produce sugar both from sugarcane and sugar beet.
Worldwide sugarcane occupies an area of 20.42 million hectares with a total production of
1333.2 million tones and productivity of 65.2 tones per hectare. Asia has the highest area (9.08
million hectares) and contributes 42% towards world’s sugarcane production.
The main By-products of sugar industries are
Molasses
Bagasse
Filter cake
1. Molasses is used to produce chemicals, spirit and alcohol.
2. Bagasse is the raw material for manufacturing paper.
3. Filter is used for manure.
Sugar is not only for domestic purpose but also it is used as semi industrial goods for the
manufacturing of foodstuff. So sugar industry has direct or indirect effect on other industries. The
different types of significances of Sugar industry are.
Sugar industry – Multi-product complexes:
There are 516sugar mills in operation in the country. A few more are in the pipeline. The
existing mills have to diversify into “sugar-ethanol cum-electricity” generation complexes.
Around 1000 such complexes will have to be established to process 3750 million tones of cane
into value added products, with an investment of Rs.1, 32,650 cores.
With 3750 million tones of sugarcane, the country can produce 16 million tones of sugar,
10 million tones of jiggery/gur, 246.15 billion liters of ethanol and 298.35 billion KWH of
surplus electricity after providing for captive consumption.
28
Profile of Indian Sugar Industry
Number of factories 516
Cane price per ton Rs.1250
Annual payment for cane 50 million
No. of cane farmers 50 million
Sugar production 22 million tones(raw value)
Value of sugar output Rs.27,000 cores per annum
Annual tax contribution exchequer Rs.2,700 cores
Employment including ancillary
activities
2 million people
Fuel Ethanol of 5% blend(value) Rs.600 cores per annum
Current export of con-generated
power(value)
Rs.750 cores per annum
The production of 246.15 billion liters of ethanol can successfully replace 147.69 billion
liters of petrol/diesel valued at Rs.4, 92,300 corers. With conjunctive utilization of 33 million
tons of domestic production of petroleum products with 246.15 billion liters of ethanol the
country can manage without any import of petroleum products. The production of 246.15 billion
liters of ethanol for utilization as fuel for automobiles has to be treated as deemed exports. This
will control the emission of carbon monoxide, nitric oxide and other particulars to the
atmosphere under permissible limits and protect the people from serious health disorders in the
urban centers.
Sugar Industry-Employment generation:
Additional sustainable employment for around 76 million persons will be generated in the
agricultural sector to redeem over 300 million people suffering under the clutches of poverty.
The additional inflow of Rs.3, 10,000 corers in to the rural sector as sugarcane prices and wages
for agricultural labor will dramatically recharge the springs of the economy. The agricultural
residue generated from the crops can be processed and converted into valuable feed for over 150
million mulch animals to generate additional revenue of Rs.3,00,000 corers annually.
29
The sugarcane sector can thus additionally generate products and services worth Rs.8,
81,805 corers. The country can manage the demand for automobile fuel with conjunctive use of
ethanol with the domestic availability of petroleum products. The country can generate sustained
employment and save around 20,000 dollars per annum on the import bill. Ethanol production
can be stepped up to over 300 billion liters to meet further increases in demand for fuel for
automobiles. The country can thus comfortably manage any increase in demand for fuel for
automobiles and emerge with comfortable trade surpluses.
Role of sugar industry in the generation of electricity:
The country has to step up generation of electricity by over 1, 00,000 MW to meet the
ever increasing demand. The additional generation of electricity, namely, 298.35 billion KWH
valued at Rs.89, 505 corers has a ready market and will provide a powerful thrust to generate
additional products and services worth Rs.27,52,278 corers in other sectors of the economy.
Progress of sugar industry under five year plans:
The planning commission estimated the requirements of white sugar in the country by
1955-56 at 1.5 million tons per annum. The rated capacity of the industry in 1950-51 of 1.54
million tons of sugar per annum was considered sufficient to meet the demand, provided the
measures were taken to utilize the idle capacity by shifting the unfavorably located factories to
more suitable sites to expand un-economic units and to increase the supply of the sugarcane to
factories so as to raise the average number of working days from 100 to 120. It was visualized
that no new factory needs be established during the period of the plan for meeting the estimated
requirements.
In April 1956 were 147 sugar factories registered under the Industries Act, 1951, with an
annual capacity of about 1.69 million tons of sugar. In addition there were 13 factories, which
were lying idle for the last several years. Their capacity was about 51, 000 tons per annum. Thus
there were 160 sugar factories with an annual capacity of about 1.74 million tons. Of these, 143
with a rated capacity of about 1.68 million tons of sugar per annum worked during the 1955-56
season.
On the recommendations of the Development Council for sugar industry, the planning
Commission fixed the targets of capacity and production to be achieved by 1960-61 at 2.50
30
million tons and 2.25 million tons of sugar respectively. The later figure was linked with
estimated domestic requirements of sugar in the final year of the plan.
It was not possible to attain the capacity target of 2.50 million tons envisaged in the
second plan mainly due to the acute shortage of foreign exchange which made it necessary to
curtail imports of sugar mill machinery and to keep the expansion of the industry in abeyance till
the manufacture of sugar mill machinery was undertaken in the country.
In the sugar industry, the stage of self-sustained growth was reached by the end of the
second plan period. The third envisaged expansion of sugarcane output of 100 million tons,
mainly through an improvement in sugarcane yield per acre of land. After making an allowance
for diversion of sugarcane for jiggery manufacture and other miscellaneous use, about 35 million
tons of sugarcane was expected to be available for sugar production. To cope with crushing of
these supplies, expansion of capacity to 3.5 million tons per year was projected under the third
plan. Through out of the plan period the production of sugar in the country was expected to meet
the internal demand in full and the surplus was expected to be exported. At the close of the plan
the production of sugarcane stood at 119.6 million tons and sugar production increased to 35.6
lakh tons. The number of factories at the end of the third plan was 200.
The production programme for the sugar industry envisaged an output level of 47 lakh
tons to be achieved by 1973-74, partly through the establishment of new units primarily in the
co-operative sector. There was a bumper sugar production of 42.50 lakh tons during the year
1969-70, against the previous season’s production of 35.50 lakh tons. Including the carry-over
from the 1968-69 season, the total available quantity was 55.54 lakh tons. The total off-take,
including 2.5 lakh tons earmarked for exports, was 35.50 lakh tons. This left a carry-over stock of
about 20 lakh tons. But sugar production fell in 1970-71 and 1971-72 to 37.4 and 31.1 lakh tons
respectively. With the raise in open market price of sugar, its production in 1972-73 again short
up and stood at 38.8 lakh tons. In the final year of the fourth plan (1973-74), sugar production
further rose to 39.5 lakh tons.
31
Plan Annual sugar production in
million tons
First 2.03
Second 2.53
Third 3.56
Fourth 4.70
Fifth 5.70
Sixth 6.20
Seventh 8.27
Eighth 14.8
Ninth 19.1
Tenth 21.3
The fifth plan proposed to set up sugar production from 3.40 million tons at the end of the
fourth plan to 5.7 million tons by the end of the fifth plan. Additional capacity was to be
encouraged primarily in the co-operative sector, emphasis being laid on integrated and large
plans to secure the advantages of economies of scale. This was to facilitate economic utilization
of by-products of the industry leading to an overall improvement in its performance. Significant
advance was also expected to be made in the diversification of raw material base with the
production of beet sugar, programs for the cultivation of sugar beet formed a part of the
agricultural development plan.
Sugar production in 1980-81 stood at 5,148 thousand tons. There were 307 sugar factories
with the installed capacity of 6 million tons.
During the sixth plan period, mainly due to year-to-year fluctuations of sugarcane
production, sugar industry underwent severe stress and strain. Sugar production fluctuated from
51 lakh tons to 84 lakh tons during the sixth plan period.
The seventh plan target is to increase sugarcane production from 180 million tons in
1984-85 to 217 tons in 1989-90. The capacity and production targets for sugar production at the
end of the seventh plan period are projected at 10.7 million tons and 10.2 million tons
respectively.
32
Output objectives have generally been met, though at the end of the Eighth plan in 1996-
97 actual production is estimated to have fallen short of the target of 14.8 million tons of
plantation white sugar due to short-term crop fluctuations. The end of the Ninth Five-year plan in
2001-02 has set the target for output set at 19.1 million tons.
During the 10th plan period, the annual incremental growth in consumption has been at 9
lakh tons per annum. For the first time the Indian Government has fixed a target of 15 lakh tons
per annum for export in this period. However, production target was fixed at 21.3 million tons
keeping in view, the large carry forward stocks at the beginning of the period and to correct the
demand-supply distortions presently caused. These targets are achievable looking at the
performance of the industry in the past with a production of 18.5 million tons achieved in 2000-
01.
The tenth plan targets an annual GDP growth rate of 8 percent. While the target looks
ambitious, growth rate of 6-6.5 percent is achievable. As sugar consumption is income-driven,
the Tenth plan period should prove positive for the sugar sector.
Problems of Sugar Industry:
In view of fairly strict Government control on sugar and its byproducts, the industry faces
some problems while receiving a certain amount of protection from the Government. The factory
has to make available a fairly large share of its product at a controlled rate for marketing through
Government channels (levy sugar). It can sell a specific quantity in the free market when the
Government announces the release quota, which limits the profitability of the factory.
Sometimes there is compulsion for export the international market price is lower than the
local market price. The price of molasses is fixed by the Government at a very low level
(Rs.60/ton) thus reducing the income of the industry.
The average production of sugar and recovery of sugar is fairly low in many states and is
detrimental to the industry as a whole. In many States recovery is between 8 to 9 percent as
against about 11 percent in Maharashtra. In many States sugarcane production is very low, i.e.
around 40 tons per hectare or more in some states like Maharashtra, Andhra Pradesh etc.
Variation in rainfall has a tremendous effect on this industry like any other agro industry.
However the major factor affecting the profitability of the sugar industry is the increasing cost of
33
inputs coupled with limitations regarding the sale of products described above. The cost of labor,
irrigation, transport, seed material and chemicals has gone up considerably during the last few
years. Hence the farmers have to consider maximizing the use of land by integrating sugarcane
production with other operations.
CONSUMPTION
The Indian sugar consumption has steadily increased at 3.5 percent since 1996.
Typically, sugar consumption is driven by the GDP growth and this has been the case for
India as well. The per capita consumption has seen a steady growth of 2.1 percent CAGR over
this period, while the population has grown at a CAGR of 1.4 percent.
Gur and Khandsari are the major alternate sweeteners that are consumed in India.The
increase in per capita sugar consumption has been at the expense of Gur and Khandsari
consumption. The usage of sugarcane for producing sugar as compared to Gur and Khandsari is a
relevant indicator of the shift in consumption trends.
Sugar Industry occupies an important place among organised industries in India.
Its main raw-material is sugarcane. The special thing for all kinds of the raw material is that it
should contain the highest percentage of the content for which it is used as raw material. But the
quality of sugarcane of our country is not so good and researchers are trying to update it but due
34
to lack of interest and proper attention from the government side, they are not succeeded yet
today. Per hectare production of the sugarcane is also not improving which is a matter of great
concern. It is probably due to lack of land fertility and lack of irrigation facilities. Other countries
of the world such as Cuba, Fizzy & Caribbean's, which are very small in comparison to India, are
producing much more sugarcane per hectare than India. The share of India in the total production
of sugarcane in the world is 37%. But the production of sugarcane is only 15 tones per acre
whereas in Java it is 56 tones and in Hawaii it is 52 tones i.e. almost four times than India. The
production cost of sugar is also high due to inferior quality of Indian sugarcane. Since sugar mills
are running to loss so they are unable to pay the cane grower growers timely. So the quality
improvement in cane grower is the need of the time.
The sugar policy of the Government has been seriously lacking a long-term perspective.
Controls, decontrols, partial controls, etc. have been used in past in an adhoc manner. It is
necessary to assure supply of sugar to poorer sections at reasonable rate. But government policy
on cane prices, control of price of sugar, dual pricing etc. have been designed and implemented
for the benefit of sugar mill owners and distributors and rarely for benefits of cane growers or for
benefit of consumers of sugar. Much of the illness and problems of sugar industry are the result
of the government's policy.
By-products
The sugar industry is beginning to diversify into multiple by-products, to enhance the
value addition for every MT of cane that is crushed.
In India, alcohol is currently produced from molasses. Alcohol is used as a raw material
for industrial uses, for production of potable alcohol and as fuel ethanol. Fuel ethanol can be used
as a substitute for gasoline. The realization from fuel ethanol is dependent on the government
mandated price, which is paid by the oil marketing companies. In addition to this, fuel ethanol
has the potential to generate revenues through carbon credits, as is the case with bio-diesel.
35
India needs to produce an additional 5 million MT of sugar by 2017 to address the
domestic demand. This can be achieved through capacity expansion both at the farm side and the
mill side.
The farm side capacity expansion can be driven by increasing the area under cane as well
as farm productivity improvements. The farm productivity improvements would be enabled
through increased yields, as well as increased sucrose content of cane. Both of these would be
driven by research and development, which will focus on developing seed varieties, advanced
farm practices and improved infrastructure for cultivation, harvesting and transportation. The
mill side capacity expansion will by driven by improved mill efficiency as well as necessary
increase in mill capacities.
There is a high variability in yields across regions in India, due to climactic conditions
and variability in farm practices. Tropical areas have higher yields as compared to sub tropical
areas. Tamil Nadu has the maximum yield in India, and is in fact higher than all the other major
sugar geographies. On the other hand, India's minimum yield is in Bihar, which is amongst the
lowest in the world.
36
Problems of Sugar industry in India are as follows
SICK UNITS:
One of the major problems of the industry is the existence of a large no. of sick units.
They are unable to run at break-even units. The reason attributed to this use of outdated machines
resulting in-efficiency and high cost structure. In Northern India this problem is particularly
accurate a distressing.
Various reasons, which cause a unit to sick-lower recovery, are factory equipment, duties
and disagreement between partners of people in the management. The worsening industrial
relations prevail which in their turn lead to stoppage of work. Break down of transport facilities
to carry cane from the fields to the factory at the proper time and disputes between cane growers
and sugar producer’s results in uncertainty in the supply of raw materials.
REGULAR MEASURES:
On the food front, sugar industry has attracted much public attention than any other
industry over the years because it is an agro based industry and an essential item of mass
consumption. So, naturally all section of people i.e., legislations, politicians, kisen leaders, labor
leaders and public at large in intervene to extent pressures and pulls often in different directions.
Sugar has been put to most rigid control to which no other industry has been subjected.
PAYMENT OF HIGHER PRICES OF CANE:
The sugar mills have to pay much higher price for the purchase of cane than what is
statutory fixed for instance, in 1974-75 crushing season, sugar mills in central and western up
had paid of Rs 1450 per quintal of cane, those in east U.P. and Bihar had to pay Rs 1350 per
quintal as against the notified statutory cane price Rs 850 per quintal.
DENIAL OF FAIR RETURN:
A study of finances of 77 sugar factories for the peri
od of 1965-66 to 1970-71 made by Reserve Bank of India points out declining trend in
profitability of these companies. Their sales that showed arise of 13.3% in 1966-67 rose only by
8.5% and 0.4% during 1960-70 and 1970-71 respectively. But the rates are divided and
maintained. In recent years a fair rate of investment has been denied to sugar industry.
37
HIGH EXCISE AND OTHER DUTIES:
Basic consist had shot up due to the various statutory provisions like the implementation
of the second wage board. Award rate of depreciation under the income tax rules increased can
fright charges etc., the local levies in certain states have gone up. In Haryana, for instance, cane
less had been double in co-operative sectors. Packing charges and price of consumable stores
also substantially.
GOVERNMENT CONTROLS:
Government control over all aspects of the production and sale of sugar extends to the
level of wholesalers in the distribution chain. All sugar wholesalers need to obtain a license
issued by the government notifications for the amount of inventories they can maintain.
Government of India regulates & controls the rates of sugarcane supplied to the mills by
farmers. The Statutory Minimum Price (SMP) announced by GOI year is used as a benchmark by
the State Governments to fix their State Advised Price (SAP). The SAP could be a recovery
linked average or just a flat rate. Government enforces a dual pricing policy for the sugar
industry. Presently 40 % of the production is sold at a fixed price to the government, which is
used for PDS and other market operations.
The government controls supply of sugar in the open market through monthly sugar
release notifications based on market conditions and thus influencing the open market prices to a
great extent.
Sugar exports were governed by the Sugar Export Promotion Act,1958, which stipulates
that the Government can use 20 percent of the country’s total production for sale abroad The
Government de-canalized exports in 1997 allowing private parties to export sugar. The
government has also put sugar imports on Open General License (OGL) allowing private parties
to import sugar.
The GOI charges a higher excise duty on free sale sugar in comparison to levy quota, so
as to recover the subsidy provided for PDS supply. In addition, under the Sugar Cass Act 1982, a
case is charged to sugar sold in the domestic market, which directly goes to Sugar Development
Fund (SDF).
38
Currently the government levies an excise duty of Rs. 6386 per ton on levy sugar and
Rs.9785 per ton on free sale sugar. In addition Rs.140 per ton is levied as cases for domestic sale
of sugar.
The Government of India has recently handed over powder to the state governments to
control movement of molasses. The state governments used to control pricing of molasses and
bagasse. In last few years, these controls are dispended with the molasses based alcohol however
continues to be under the licensing provisions.
GROWTH OF SUGAR INDUSTRY IN ANDHRA PRADESH:
Sugar industry is mostly located in the regions, which are fertile and suitable for growing
sugar. Andhra Pradesh is one among fertile regions of India and has been a sugarcane cultivating
state for long time.
Sugar industry continuous to play an important role in economy of the Andhra Pradesh
state, as sugarcane is one of the important commercial corps. The installed capacity of 38 sugar
factories is 54000 in 23 co-operative mills. 10700 T.C.D. in public sector units and 20250 T.C.D.
in 7 private mills. There are 140 khandasari mills in the state.
During the season of 1987 to 1988, the sugar factories in the state crushed 56 lakh tons of
sugarcane with an average recovery of 9.43%. The factories produced about 5.28 lakh tons of
sugar. The co-operative sugar mills, alone, crushed 25.07 lakh tons of sugarcane and produced
2.22 lakh tons of sugar. In the public section Nizam sugar factory and the private sector mills
account of to the remaining crushing and production. The 67 Khandasari units crushed 8.23 lakh
tons of sugarcane in 1987-88.
India has been divided into three areas based on the sugar recovery attained by the
factories. The factories where the recovery is more than 10% are grouped into high recovery
area, where the recovery varies between 9 and 10%. The cane crushed by centrifugal factories in
Andhra Pradesh also increased due to the increase in the production of sugarcane. In the year
1971-72, 2490 thousand tons was crushed in the average crushing season of 104 days, this figure
increased to 5657 thousand tons in 120 days.
The total average under sugarcane cultivation as 7000 hectares in the year 1950-51
contributing about 7% of the total average under sugarcane cultivation in India. The sugarcane
39
average in Andhra Pradesh reached to a peak level in the year 1974-75. i.e., 19500 hectares,
representing a growth rate of almost of 300% over that of 1950-51. This type of growth was not
witnessed since 1974-75. During the recent years, this is decreasing and this figure has come
down to 13200 hectares since 1985-86 and 15000 hectares in 1987-88.
The total sugar production in India in 1950-51 was 11.34 lakh tons and for Andhra
Pradesh it was only 0.25 lakh tons making 0.2 % total production. In 1985-86, the total
production of sugar in India has gone up to 70,160 tons and for A.P., it was 9,575 tons. This was
increased to 10,286 tons in the year 1987-88. But in the year 1986-87 the production was come
down to 8,808 tons.
Andhra Pradesh had been supply state as far as sugar is consumed till 1977-78 during
which year the total production was 5,645 tons leaving a supply production of more than 150
tons i.e., total production was 199 thousand tons. This is due to lower production of sugar with in
the state because of poor supply of cane to the factories.
Transport of cane is not easily supplied to the factories due to lack of road facilities.
Therefore, farmers are making sugar in their near fields. The cane price also is not favorable. Too
instance, the cost of sugarcane price is risked due to new types of measures. The price for
sugarcane fixed by the factory is low, which is not economical and it is the reason for the short
production in Andhra Pradesh.
But in sugar production, Andhra Pradesh has a favorable position. Recently Government
of Andhra Pradesh announced to establish 6 more factories. If the price of sugarcane is increased
and loans to farmers raised, the position will be more stable and it will be in an increasing trend.
Based on the estimation of 6% GDP growth rate and 2% population growth rate for the
period 1998-99 to 2000-01, the demand for sugar is expected to grow at the rate of 7% for the
corresponding period. This will lead to increase in demand for sugar from 15.5 mn ton in 1998-
99 to 17.75 mn ton in 2000-01. The per capita consumption of sugar is expected to increase from
15.5 kg in 1997-98 to 16.6 kg in 1998-88 and 17.7 kg in 2000-01. For the season 1998-99,
imports are estimated at 0.8 mn ton. It is expected to drop for season 1999-2000 to 0.6 mn ton
and to 0.4 mn ton in 2000-01.
By estimating sugar cycle to top in season 1999-2000 by clocking a growth of 7% and
then witness a drop in production for the season 2000-01, the closing stock will come down to
40
3.3 mn ton by September 30th 2001 from the present level of 5.4 mn ton by September 30th
1998.
NATIONAL FEDERATION OF CO-OPERATIVE FACTORY LTD
The National Federation of Co-operative Sugar Factories Ltd., completed 27 years of its
successful working as on 30th June 1988. Like earlier years, the federation continued work as per
it subjective.
As far as licensing is concerned though the fresh guidelines for 7th plan show that the
preference will be given to Co-operative sector, it is apprehended that, very few factories may be
established in the Co-operative sector due to increase in the grower share capital and due to non
availability of sufficient cane for the first crush of the factory with in a radius of 40 kms.
Therefore, the federation has been repeatedly pleading with government to direct the State
Government to subsidize the short fall in the growers share capital and to change the parameters
for joining on the access of recovery. So that proper incentives can be availed by new units and
expansion projects.
Co-operative sugar factories in Andhra Pradesh:
Andhra Pradesh has a pride of place in having pioneered in the organization of co-
operative sugar factories in the country. The first co-operative sugar factory in the State is
ETIKOPPAKA sugar factory, started its production in 1951-52 seasons. The main aim of
organizing industry in co-operative sector is to up-lift the riots in backward areas. There are at
present a number of co-operative sugar factories.
Six new co-operative sugar factories have completed the construction and gone into
production during the year 1983-84. Originally the factories have entered agreement with
machinery supplies in the last quarter of 1972 and first quarter of 1977. As per the original
schedule the factories were expected to go into crushing by 1978-79. Due to several factors like
non-availability of funds, non-processing of loan applications by the central financing institutions
and for non-availability of the incentives due to de-central of sugar, the sugar factories could not
compile to the construction in time. Consequent to this, the project has been escalated from
Rs.600 lakhs to Rs.900 lakhs. Though the State Government, have undertaken the project cost,
the government could not be in a position to fulfill commitment fully due to stringent financial
position.
41
The Andhra Pradesh State Federation of Co-operative sugar has the unique distinction of
having as one of its members, the Etikoppaka co-operative sugar factory, which is the first
project, set up in the country as an experiment in the co-operative sector for sugar production.
The federation has been playing effective role in the organization and proper development
of co-operative sector of the industry in the state. The contribution of co-operative sector to the
state production has been significant, being over 25%.
From the every start, the federation realized the importance of cane development. For the
success of industry it has been taking necessary measures for the development of quality cane. In
the light of the financial assistance provided by the National co-operative development
corporation and to make more service to the factories, the federation has engaged technical
express in the field of sugar technology, finance and engineering. The federation has a
programme to economic the expenditure to the factories undertaking bulk purchases of important
items of consumables required by individual factories and also to keep initialization between the
factories by supplying un-required items of one factory to another factory in need and there by
reduce inventories.
It is also under advice consideration to centralize the sales activity by operating at two or
three centers for all co-operative sugar factories so that they should get the benefit of the
economy.
The federation has undertaken the field men on the factories in the development of cane
and cultivation. The federation is encouraging factories to participate in seminars and refresher
courses conducted from time to time for the benefit of managing directors, accounts staff
engineers, chemists and agricultural officers etc., of the co-operative sugar factories. This goes a
long way in making the managerial and supervisory staff, of the factories more equipped in
respective field of activity. The federation also assists the factories in the recruitment of technical
staff, claiming incentives to all other matters connected with the running of the factory.
The progress of the co-operative sector the sugar industry during the past two of decades
can be seen from the figures. As compared to 34 co-operative sugar factories producing only
17.47 percentage of the total sugar production in 1961-76 there were many as 194 co-operative
sugar factories in operation during 1986-87 producing 5.9% of the total output to the country.
42
SUGAR MILLS IN ANDHRA PRADESH (DISTRICT WISE)
DISTRICT PRIVATE
SECTOR
PUBLIC
SECTOR
CO-OP
SECTO
TOTAL
Visakhapatna
m
4 Nil 1 5
West Godavari 4 Nil Ni
l
4
East Godavari 5 Nil 1 5
Krishna 4 Nil Ni
l
4
Vizianagaram 3 Nil Ni
l
3
Nizamabad 1 Nil 1 2
Medak 2 Nil Ni
l
2
Chittor Nil Nil 2 2
Guntur Nil Nil 1 1
Srikakulam 1 Nil 1 1
Nalgonda Nil 1 Ni
l
1
Kadapa Nil Nil 1 1
Anantapur Nil 1 Ni
l
1
Nellore Nil 1 Ni
l
1
Karimnagar Nil Nil 1 1
Kurnool Nil Nil 1 1
Khammam Nil Nil 1 1
Total 24 3 11 36
43
CHAPTER – III
COMPANY PROFILE
44
BRIEF HISTORY OF THE ORGANISATION
Sri R.V.G.K. Rangarao landlord, Rajah of Bobbili and Ex. Chief Minister for joint capital
of madras had established a Sugar factory named as “Sri Rama Sugar Mill” at Bobbili under
private sector in the year 1937. He also started another sugar factory near Bobbili at
seethenagaram for the benefit of the surrounding cane growers. They started factory with 850
MT per day crushing capacity at Bobbili and 650 MT per day at seethanagaram. Due to losses
incurred by the factory the operations are closed in the year 1978-79.
Then the representation made by the cane growers resulted the Government of Andhra
Pradesh to under take the factory and marged with Nizam Sugar factory Ltd. Under autonomous
control of Government. In 1986 the former Chief Minister Sri N.T. Ramarao has declared as a
Government Company.
The Nizam Sugar successfully run the factory till 1990, due to told machinery and poor
performance of the production the Government has decided to construct new factory in between
seethanagaram and Bobbili for the benefit of both factory cane growers as well as workers then
the Government has started construction and stone laid by Sri N. janardhana Reddy who was the
Chief Minister of Andhra Pradesh.
According to the construction and execution works have been completed in the year 1995
and the new factory was inaugurated with 2500capacity by our Honorable Chief Minister Sri N.
Chandrababu Naidu on December 28th 1995. due to heavy loses incurred during the construction
period the company has not over come the debts hence the Government has taken decision to
privatization the entire Nizam Sugar factories.
According the pross of privatization and other matters entrusted to call tenders and
finalization of privatization process as per the guide lines of the World Bank.
The N.C.S. estates Ltd has quoted highest bid and shaken over the Nizam Sugar factory at
Latchayyapet in the name and style of the N.C.S. Sugars Ltd. And was inaugurated the factory on
18th December 2002 under the new management.
NARAYANAM CHELAMAYYA & SONS (NCS):-
N.C.S. group of companies are well established multi-core business group over the last 2
decades with corporate Head Quarters in Hyderabad the Group is engaged in diverse business
45
activities like manufacture international trading development of port based infrastructure bulk
transportation, information Technology etc.,
The N.C.S. estates private Limited one of the group companies owns a distillery at
samarlakot, East Godavari District engaged in manufacture or extra neutral alcohol which uses in
the manufacture of Indian made liquor. The distillery has an installed capacity of 20 KL per day.
Two of the group Co, s N.C.S. storage systems private Ltd. And GOWTHAMI Liquid storage
Pvt. Ltd., both are located at Kakinada, deep water port provide storage infrastructure for
handling and storage of liquid commodities including petroleum A,B & C, class products and
other hazardous & Non-Hazardous chemical edible oils etc.,
The group also operates similar facilities under the name and style of Konakan storage
system private limited. At Karwar port in Karnataka and Cochin port in Kerala for handling and
storage of host liquid products. All the storage tanks terminals have the good infrastructure to
handle Multiproducts.
The group trading division deals in exports and imports with main focus on exports of
specialized products like molasses, alcohol and import of edible oils etc., this division is
aggressively active in trading and has reached customers who play a major role in the global
market of molasses and alcohol.
The NCS Sugar’s Ltd. Initially it was Nizam sugar ltd constructed in 1993 to 1994 and
the sugar processing work carried out till December 16 th 2002 by the Nizam sugar’s Government
body during the privatization process this unit was sold by Nizam sugar’s to the NCS group of
companies.
Basically the Sugar Industry is a Seasonal Industry and the Industry will be in operation
per a period of 6 to 7 months from November to April or May. This industry considered to a
labour oriented industry.
Before the privatization process i.e. before 16th December 2002. it was under Nizam
Sugar’s Ltd. Having the manpower strength of 600 workmen approximately (inclusive of
permanent and seasonal employees.) After privatization the NCS group absorbed only 336
employees and maintaining till date.
As explained above sugar industry is a seasonal industry, Agro based industry. This sugar
unit capacity is 2500 TCD (Tons Cane Per day).
46
Crushed capacity from 1994 to till 2003. During this seven years period the unit crossed
maximum amount of cane in one season is around 2.5 lakhs tons.
After privatization the NCS management did some technical modification inside the plant
when even necessary and they could able to increase the capacity from 2.5 lakhs tons to 3.22
lakhs tons. During the season 2007 - 2008 they crushed 4.35 lakhs tons with some manpower.
In general when we look into the sugar industry organization structure the following
department can be seen.
1. cane department
2. maintenance department
3. process department
4. administration department
As explained above the cane dept is the most important department in sugar industry the
raw materials are sugarcane produced in the fields. The cane department should be organized
very well and they should ensure to procure the allotted quantity of cane with the expected
recovery quality from the fields.
After privatization NCS group of company giver the highest priority to the cane
department and introduced new variety of sugar cane seeds for higher output having better
resistant of pests and cane with stand drought situation.
With the above by planting the latest variety of sugarcane in the fields, the raw materials
quantify will be multiplied by one and half of two times than the existing.
The last season i.e. 2006-2008 season this unit has crushed 3022 lakhs tons of cane and
established a new record of production with the manpower of 336 with slight modification in
production area.
From the above it is evident that after privatization the NCS group absorbed suitable
required number of employees and utilized manpower in right direction in right time high spirits
resulted highest rate of crushing closed off season with better recover without any enhancing
manpower.
47
From the above is under stood that after privatization process NCS group absorbed 60%
manpower utilized then fully in season and established its capacity this could possible only with
the best H.R policies.
To keep up the spirits of workmen management had polices of
A) Making the salaries and wages in time
B) Fulfilling the all statutory rules and regulations.
CAPACITY AND LOCATION:-
The NCS sugar’s Ltd. Latchayyapet is located at seethanagaram mandal, Vizianagaram District
of Andhra Pradesh. The capacity of plants is 2500 TCD (Tons crushing per day).
MAN POWER DATA:
OFFICERS PERMANENT SEASONAL OTHERS
Supervisor-B 3 - -
Supervisor-C 1 2 -
Clerical Grade- 11 - -
Clerical Grade-26 - -
Clerical Grade- 320 29 -
Clerical Grade- 4- - -
Work men 2 - -
Highly skilled 5 1 -
Skilled - A 13 20 -
Skilled - B 15 81 -
Semi Skilled 13 52 -
Un Skilled -1 1 40 -
Un Skilled -2 - - -
Total 79 225 -
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ALUMNI OF THE COMPANY:
Chairman : Sri Narayanam Narasimha Murthy
Managing Director : Sri N.Nageswara Rao
Directors : Sri N. Murali
: Sri N. srinivasa
Chief Executive Officer : Sri C.V. Krishnayya
Personal Manager : Sri M. Gangaraju Garu
ANNUVAL GENERAL MEETING:-
Every month will be conducted meetings with M.D. and other department heads
whenever the MD arrival to the plant.
The sugar unit at latchayyapeta commencing crushing on 25 th December 1995
inaugurated by Sri N. Chandra Babu Naidu Honorable Chief Minister of Andhra Pradesh as a
public sector as government policy and incurring heavy losses of this unit (NSF) this sugar unit
was privatized and sold to NCS sugar’s companies. In the year December 2002 NSC was of
privatized and the new management is established new machinery in place of old machinery and
modified as modern plant and increased 4000 TCD rated capacity.
The NCS management is giving more subsidies incentives on cane development and see
the growth of growers as well as industry.
This year the availability of raw material the company wishes to expansion of the unit
from 2500-4000 TCS which is planning to commence for 2008-2009 season.
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VARIOUS DEPARTMENTS & THEIR FUNCTIONS IN NCS SUGARS LTD:
PRODUCTION DEPARTMENT:
The production department is the key department for the organizations development if it
performs well the company will grow, if the department not performs well it may be leads to
organization wealth decrease.
The entire income incurred to the organization from product sales only. That’s why this
department has such importance. The function of this department is to produce sugar and its
byproducts from the cane as well as from raw sugar.
Particulars of cane crushed:
Duration 2009-10 2010-12
No of Days 175 189
Cane Crushed(Tonnes) 11,96,365 12,83,994
Sugar Produced(Qts) 13,95,11s0 13,93,770
Recovery (%) 11.14 10.85
Turnover (Rs in Lakhs) 22,319 16,792
50
NCS Sugar’s Limited Total Production:
FINANCE AND ACCOUNTS DEPARTMENT:
The main function of financial development is to arrange the funds for salaries, wages for
the employees and daily wages, to arrange payment to the sugar cane growers for the purchase of
other considering goods, oils, chemicals, spare parts of the machinery and they have to receive
sale proceeds by way of selling products.
Finance Department Chart
51
Accounting Department
Manager
Finance and Accounts
Asst. Manager Finance and Accountants
Asst. Accountant Officer
Clerks
YearProduction
(in quintals)
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
11,26,400
13,09,340
9,23,650
10,75,620
12,24,740
13,95,110
13,93,770
PERSONNEL DEPARTMENT:
The main function of personnel department is to look after with manpower planning,
recruitment, selection, placement, induction, promotion, and transfer, demotion, separation, lay-
Total Income 3,090,890,885 100 3,492,373,638 100Expenditure: Material cost 478,897,756 15.49 429,965,937 12.31Cost of Sugar Export 1,143,104,930 36.98 8,517,837 0.24Cost of Sugar Trading