CHAPTER-1 INTRODUCTION TO THE COMPANY SAKTHI GROUP: Mission: The mission mode project under sugar production technologies aims towards sharper and focused technological up gradation in selected sugar factories to accomplish, interlaid the cost effectiveness of sugar production through improvement in plant efficiency, energy saving, etc. In addition to the above, the focus is also on improving the capital output ratio through optimization and identification of user friendly technologies.
Vision: To be one of the top five sugar producers in India. To be one of the top auto component manufacturers in India. To be leading producers of alcohol and allied energy producers. To have the best possible alternative power producers in the country. To maximize the trade in raw sugar so as to maximize the earning of the company. Sakthi Sugars Limited is one of the largest producers of white crystal sugars in the country accounting to the capacity of 13,500 tons of cane crush per day. Sakthi Groups is a leading industrial conglomerate in South India. Motivated by a keen desire to diversification in new areas of business, the Sakthi Group born and grew as a power full entity, expanding its interest into various spheres of industry. Sakthi Sugars Limited is committed to conduct its accordance with the applicable laws, rules and regulations and with highest standards of business ethics. P.Nachimuthu Gounder, farmer with a difference owned a few bullock carts the hired out. He could feel the impulse of the people and made revolutionary changes. He created history in 1921 by introducing the first taxi service in Pollachi. In1927, he started the first bus service called Annamallais Bus Transport Company. This company is the parent of Sakthi group. Sakthi group was formed in 1951. Page 1 of 16
The various areas in which the group acts are 1. Sugar 2. Automobile parts 3. Bus transport 4. Education and IT 5. Foundry 6. Fruit beverage 7. Finance 8. Industrial alcohol 9. Parcel service 10. Sales and Services of Automobiles 11. Soft drinks 12. Soya products 13. Social services 14. Textiles Sakthi Sugars Limited is the flagship company of the Sakthi Group and is one of the largest producers of sugar in the country accounting for a capacity of 12,750 tons of cane crush per day in four sugar units. The four units include three in Tamil Nadu and one in Orissa.
LOCATION OF UNITS: 1. Sugar a. Tamil Nadu i.
Sakthi Nagar, Erode District-established in 1964.
ii.
Padmathur village, Sivaganga District-established in 1989.
iii.
Ponduraisemur village, Modakurichi Taluk, Erode District-established in 2007.
b. Orissa i. Haripur village, Dhenkanal-established in 1994. 2. Distilleries a. SakthiNagar, Erode District-established in 1972. Page 2 of 16
b. Haripur, Dhenkanal (Industrial Alcohol) – established in 1996. 3. Soya a. Marichinaiken Palayam, Pollachi – established in 1990. 4. Co generation Plant a. SakthiNagar – established in 2003 b. Modakurichi – established in 2007 c. Sivaganga – established in 2008 5. Ethanol Plant has been established in SakthiNagar.
ABOUT SAKTHI SUGARS LIMITED: The company was incorporated on 12.5.1961 and the certificate of commencement of business was obtained on 11.5.1962. The sugar factory at Sakthi Nagar with a capacity of 12,750 tones crushes per day (TCD). The capacity of this unit has been increased to 6000 TCD to accommodate increased quantum of sugarcane available at the command area of this factory. The performance of the sugar unit has been efficient all along from its inception and achieved it’s ever - best performance in the year 1999-2000 by crushing 16.79 lakh tones of cane. Cane crush in this unit has crossed one crore tone mark in 1983, the maximum quantity crushed by a single factory in 19 years.
FEATURES: More than 35,000 acres of sugarcane available around the factory supported
by river and cannel irrigation. Crushing in the unit-More than 8 months every year. Unit has capacity to produce export quality sugar corresponding to less than
35 ICUMSA (International Commission for Uniform Method of Sugar Analysis, a measure to determine the quality and color of sugar adopted by European markets) and has exported more than 12000mt. Optimal recovery of sugar from sugarcane i.e. more than 10%.
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Secured national efficiency award for many years. Research and development wing of this unit responsible for developing new
sugar rich pest resistant varieties of sugarcane. Pioneering efforts put in by the cane department has increased the yield per
hectare to more than 125 mt. Has mechanical harvesters imported from Austoft Industries of Australia. Exported about 13.5 lakh quintals of sugar for the period from October 2000
to October 2001 and bagged the national award for exemplary export performance.
ORGANISATION PROFILE: Year of incorporation: 1961 Registered office: Sakthi Nagar, Bhavani thaluk, Erode district, TamilNadu. Corporate office: 180, Race Course Road, Coimbatore- 641018. TamilNadu.
QUALITY POLICY: Meeting the requirements of quality. Continuous improvement in quality. Up gradation of Human Resource.
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ACHIEVEMENTS OF THE COMPANY:
Lowest sugar losses.
Highest standards of technical efficiency.
Highest mill efficiency.
Only sugar factory in India which could produce super fine grade of sugar corresponding to international standard measures at grade 85 and below by International Commission for Uniform Method of Sugar Analysis (ICUMSA).
The performance of the sugar unit has been efficient from its inception and bagged national award for achieving highest quantum of sugarcane crushed in a single unit in 2005-2006. It also received national efficiency award consecutively for three years from its inception for minimum loss in sugar recovery.
MAIN PRODUCTS OF THE COMPANY: -White crystal sugar It has the following: L30 – This is the largest size sugar which is of third quality.
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M30- This is the middle size sugar which is of second quality taken to local markets.
S30- This is of very minute size (microns) sugar which is of first quality sold to
PEPSI Company.
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BY PRODUCTS OF THE COMPANY:
Molasses- Molasses is a byproduct of Sugar refining chiefly used for alcohol production. This is thick dark uncrystallized syrup produced by boiling down juice from sugarcane. The yield of molasses per ton of cane is in the range of 4 to 4.5%. The entire molasses output is routed to the distillers unit which is maintained by the organization
Bagasse- This is also called Megass. Bagasse is the byproduct of sugar left behind after crushing of sugar cane. This is the end product of sugarcane mill. It is used as a fuel in the sugar factory boiler. It is the essential ingredient for the production of pressed building board, acoustical tiles, and other construction materials. And also it is used as a source of cellulose to make ethanol fuel.
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Press Mud- Press mud, the solid waste produced while processing sugar cane is rich in potassium, sodium, phosphorous and organic matters. Currently Press mud is used as a fertilizer in sugarcane cultivation. Press mud is also a base material for producing bio-earth which is done by composting with spent wash, a liquid- waste generated out of distillery operation.
MAJOR COMPETITORS: EID Parry (India) Limited Dharani Sugars and Chemicals Limited Bannari Amman Sugars Limited Kothari Sugars and Chemicals Limited Ponni Sugars Thiru Arooran Sugars Limited
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CHAPTER: 2 IDENTIFICATION OF THE PROBLEM The company is not getting required supply of raw materials on time.
Defining of the problem: Sakthi sugars is not getting sugarcane when it requires, t his affects the factory’s production process and due to this there occurs a delay in supply of finished products to customers on time. The impact of the issue is that the factory is not getting proper returns from their customers which mainly cause problems like delay in pa yment to the farmers.
CHAPTER: 3 ANALYZE THE PROBLEM: The Sakthi Sugar industry follows predictable cycle of at least 4-5 years shortage of sugar leads to an increase in prices. They pay higher prices for cane which tempts the farmers to switch to sugarcane. This result in a glut in both cane and sugar and this depresses sugar prices. Cane payment of farmers get dwindled and delayed as inventory buildup, farmers switch to other cash crop which leads to a fall in sugarcane production and also sugar production. The consequent shortage of sugar results in an increase in sugar prices. This off course does not take into consideration the effect of monsoon, which also has similar consequences.
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THE SUGAR INDUSTRY CYCLE 4-5 years
year 1 Excess production
Farmers switch back to cane
Price down
Sugar prices firm up
Profit down
Sugarcane production down
Cane payment dwindle by the factor Farmers switch crops
2-3 years
The factory is not getting the required raw material on time because when the farmers who are supplying canes to the factory are not paid their cane payments properly. This affects the cane production and there occurs a delay in supply of cane to the fa ctory when they required. The farmers are not paid properly by the factory is due to the delay in returns from the creditors.
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CHAPTER: 4
IDENTIFY POSSIBLE SOLUTIONS Payment by installments: Farmer’s payment can do through installment method, where the farmer’s total payment is paid by 3 installments through correct time intervals.
Revenue sharing model: Factories can share their revenue with the farming community. They can share the profit made by them through by-products such as molasses, ethanol, fertilizer, and co-generation.
Tripartite financial inclusion (Farmers – sugar factory- banks/financial institutions): This Financial arrangement ensures sharing of the risk and assets among the three partiesProducers, Sugar factory & Financier. This will enable alignment of incentives and ensure that there is congruence in all actions and inputs.
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CHAPTER: 5 EVALUATING SOLUTIONS SOLUTION 1: PAYMENT THROUGH INSTALLMENT: The farmers who are going to cultivate sugarcane will register their land by accepting that they will supply the sugarcane to the factory after harvesting the cane. The seeds for cane cultivation are given to the farmers by factory itself. Cane inspectors in the factory are responsible for checking the growth of the cane till harvesting. After harvesting the cane is taken to the factory and tested for its recovery. On the basis of the recovery, the farmers are paid. Currently the farmers are paid by the Sakthi Sugar factory as Rs.2000 for a tone of sugarcane. Sugarcane prices are fixed every year by the government at the period of harvesting. This year government fixed sugarcane rate is Rs. 2100. The farmers are initially paid an advance amount of 20,000 in their total amount which the company wants to pay for them. The remaining amount was paid only after 90 days. The company is not able to make payments to their farmers because their creditors do not make payments on time to the factory. This will impact on the farmers were they cannot further invest in cultivation and sometimes farmers shift to other crops. This makes shortage in sugarcane production and the factory does not get the raw material on time. This problem can be solved by implementing the payments to the farmers by installment. The farmer’s payment can be paid in three or four installments. This will make the farmers feel profitable and helps the farmers to further invest for cultivation.
Advantages of the payment through installment: Farmers get early payment Farmers do not switch to other crops Sugarcane production will be high and also the factory gets adequate supply
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Sugar will be produced and supplied to the customers on time
Disadvantages of the current system: Farmers are agitated to supply cane to the factory Farmers are not able to further invest in cultivation Delay in supply of raw materials to the factory Also delay in supply of finished products to the customers
SOLUTION 2: REVENUE SHARING MODEL: The factory gets by-products like molasses, bagasse and press mud. This will helps the factory to produce ethanol, distillery alcohol, power and fertilizers . As the factory has 19,000 tons of cane crush per day, they can also use the by-products to produce ample amount of ethanol, power, alcohol and fertilizers. The factory has its own ethanol plant, distillery plant, and co-generation plant. As the company is suffering from payment arrears to the farmers, they can share the revenues generated from the by-products. Some of the competitors of Sakthi Sugars implemented this Revenue sharing model which has gradually reduced the arrears which the fact ory wants to pay for their farmers. The Distillery alcohol or spirit produced is supplied to local hospitals. The ethanol fuel produced is supplied to Hindustan petroleum and Bharat petroleum. The power generated is utilized for the factory purpose and the remaining is supplied to TamilNadu Electricity Board. Press mud is supplied to paper mills and also used as fertilizer which is supplied to local markets.
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Advantages of revenue sharing model: Factories payment arrears to the farmers will be reduced Half of the payment arrears are paid earlier by the factory Factory gets instant funds to solve the payment arr ears
SOLUTION 3: TRIPARTITE
FINANCIAL
INCLUSION
(sugar
factory-
farmers-
banks/financial institutions): The farmers who have registered in the sugar factory are given the sugarcane seeds for cultivation. As the fertilizers and pesticides prices are high, small farmers are not able to invest much in the cultivation of sugarcane. So, they were shifting to other crops which do not needs much investment. This also causes the shortage in raw material to the factory for production on time. To solve this problem the factory can implement a tripartite financial inclusion. The factory has already maintaining their employee’s accounts in canara bank, so that the factory can approach the bank to arrange loans for those small farmers. This will help the farmers to invest in cultivation of sugarcane.
Advantages of Tripartite financial inclusion: Small farmers will be benefited Farmers increase the sugarcane production Factory gets raw material on time which increases its turnover
Disadvantage of tripartite financial inclusion: When the farmers do not pay the loan with in the credit period, the factory has to bear
the expenses of paying the loan.
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If the interest for the loan provided by the bank to farmers is high, this will also affect
small farmers.
CHAPTER: 6 ACTION PLAN: The main By-products produced by Sakthi sugars are ethanol, power and fertilizers. By increasing the capacity of the ethanol plant, co-generation unit and distillery plant,
their profit will also increase by which they can share their revenue with the farming community. This will reduce the arrears in payments to the farmers. Installment method will give better solution for the delay in payment for farmers. The total amount paid to farmers is divided equally and paid in 3 install ments. Factory can get funds by implementing revenue sharing system.
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REFERENCES:
1. http://www.sakthisugars.com/ 2. http://www.vsisugar.com/india/statistics/world_indiasugar.htm 3. http://www.tn.gov.in/sugar/cane_details.htm 4. http://www.sugarindia.com/overview.asp 5. http://www.sugarindustry.com/sugarprocess.htm
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