Literature Review

1)

Anon.(1997) “India’s bitter-sweet pill” - India's sugar daddies want special protection as the
upcoming festival season teases the country's sweet tooth amid fears of shortage. At issue is a
regime that controls sugar in three main ways. First, national bureaucrats set a statutory
minimum price that processors must pay farmers for sugar-cane. Then state governments fix
even higher prices. These are wholly arbitrary. Second, there is a dual-pricing system for
sugar. Refiners must sell 40% of their output to the public distribution system at a loss. This
year, for example, the official price is two rupees per kilo less than the minimum cost of
refining. The remaining 60% is sold at market rates. Third, the government distributes
licences for new mills. This was supposed to promote efficiency. A few sugar processors,
such as Triveni, Balrampur Chini and Bajaj Hindustan, which are among the most dynamic of
India's sugar daddies, have a different solution: to make a bonfire of the controls. Farmers
would benefit from being able to sell their harvest to the highest bidder. Processors would
survive on their merits, creating a competitive sugar industry. And the boom-bust cycle
would be broken. Sweet dreams indeed.

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2)

Mint.(2010) “Bajaj Hindusthan's margins hit by falling sugar prices”- The earlier logic was
to use cash flows from the sugar business to create an alternate revenue stream.Bajaj
Hindusthan Ltd (BHL) has taken a sensible decision to transfer its power business to a 100%
subsidiary. The sudden downturn that hit the sugar industry has forced a rethink. While BHL
will hold at least a 26% stake in the power business, its funding commitment will be lower
and it will also stay a focused sugar company. Still, BHL's operating profit declined by 20%
and its margin fell to 23% from 40%. The decline in net profit at 73% was much higher,
mainly due to forex gains in the year-ago period. Sugar players believe that prices will be
stable at current levels for the next few quarters. But then they were wrong on both
production and price estimates too. Stable prices are critical for them to sell their stocks at a
profit. BHL is sitting on 7.22 million quintals of white sugar and 4.66 million quintals of raw
sugar. Its white sugar inventory cost is around Rs27/kg while its raw sugar cost is around
Rs22/kg. That still gives it enough room to make profits, based on current price levels. The
sales will also free up cash stuck in inventory, allowing it to pay down debt.

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3)

RajeshRoy.(2010) in his study in“India Sugar Output to Top Demand” investigated that
India consumes about 23.0 million metric tons of sugar annually, but its production failed to
meet demand in the current marketing year that started Oct. 1 and the year before as the area
under sugarcane cultivation fell and a drought hit the farm sector. The shortfall drove sugar
and cane prices up, enticing farmers to plant cane in more areas this year. The fall in sugar
prices may affect local mills' ability to pay higher cane prices to farmers. "If govt. don't take
corrective measures now, sugarcane farmers may shift to other crops”.

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4)

Accord Fintech.(2010) “Global scenario creates buzz in Indian sugar market”- According to
the first advance crop estimates for the Kharif harvest released by the farm ministry,
production of sugarcane in the country is likely to see a growth of 16% in the next season to
touch 324.91 million tonne as against 277.75 million tonne in 2009-10 season. . Prices are
ruling between Rs 25-28/kg in various regions of the country. On the other hand, the export
price from the country is between Rs 28-Rs30 a kg. If the government does allow exports,
and global prices remain firm, there could be 2-5% upside in domestic prices as well. This is
difficult to predict at this stage though as decision by the government will depend on how
much the actual production increase in current season, which will not be very clear for
another couple of months or so. Overall, we believe that after treading in the bearish territory
for couple of quarters, sugar industry currently has a neutral outlook.

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