ECONOMIC VIABILITY OF SUGAR INDUSTRY IN NORTH COASTAL ZONE OF ANDHRA PRADESH STATE
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Date
2022-08-04
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guntur
Abstract
India is the largest producer and consumer of sugar in the world. The sugar industry is second largest agro-based processing industry in the country that impact livelihood of about five crore farmers and their family members and five lakh workers directly employed with the sugar mills. Sugarcane cultivated farmers from North Coastal Districts are linked with sugarcane industries, operating under organized cooperative and private sectors nearer to rural areas.
The present study entitled “ECONOMIC VIABILITY OF SUGAR INDUSTRY IN NORTH COASTAL ZONE OF ANDHRA PRADESH STATE” has been undertaken with the following objectives:
1. to analyze the economic and financial viability of sugar factories. 2. to identify the methods of backward integration adopted by sugar factories. 3. to identify the problems and suggest measures to enhance the financial performance of sugar factories.
Probability proportionate sampling procedure was adopted for selection of respondents in the present study. In Andhra Pradesh, North Coastal Zone was selected based on highest area under sugarcane cultivation. In North Coastal Zone all three districts were selected. Based on the highest turnover, one factory from each district was selected Viz., Chodavaram Cooperative Sugars Limited, Govada, The NCS Sugars Limited, Latchayyapeta and EID Parry (India) Limited, Sankili for Visakhapatnam, Vizianagaram and Srikakulam respectively. Thirty farmers from each factory were selected, making total of 90 respondents, in which marginal ( 2ha) were selected according to their proportions. The present study was based on
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both primary as well as secondary data. The primary data was pertaining to problems faced by farmers in sugarcane cultivation and marketing; and the problems faced by sugar factories was obtained through survey method by using a pre-tested and well-structured schedule. The secondary data pertaining to financial aspects, balance sheet, cash flow statement and profit or loss statements were collected from respective sugar factories audit reports for a period of 5 years from 2014-15 to 2018-19.
Financial ratio analysis was employed for sugar factories to know about the financial strength of organization over the study period. The average current ratio was found highest (9.24:1) in EID Parry (India) Ltd., Sankili. Average debt equity ratio was positive in EID Parry (India) Ltd. (0.13) and negative in The NCS Sugars Ltd. (-5.27) and The Chodavaram Cooperative Sugars Ltd. (-8.31). Tests of profitability ratios revealed that the average net profit to total assets ratio and net profit to fixed assets ratio both were negative in The NCS Sugars Ltd. and The Chodavaram Cooperative Sugars Ltd. and positive in EID Parry (India) Ltd. i.e., 0.04 and 0.08 respectively. The average gross ratio was more than 100 in Chodavaram Cooperative sugars (153.59) and NCS sugars (132.67) indicating lower net profit and it was below 100 in EID Parry (India) Ltd. (28.11) indicating higher profits. The average operating ratio was lowest i.e., 19.02 in EID Parry (India) Limited. Tests of financial strength ratios revealed the highest average net worth in EID Parry (India) Ltd. and in remaining two factories it was negative. The average net capital was less than unity in The NCS Sugars Ltd. (0.82) and The Chodavaram Cooperative Sugars Ltd. (0.87) and it was more than unity in EID Parry (India) Ltd. (15.39).
The project evaluation techniques viz., Net Present Value, Benefit-Cost Ratio and Internal Rate of Returns were employed to assess the economic viability of investment on sugar factory. Negative NPV and BC ratio below unity indicated that both the factories viz., The Chodavaram Cooperative Sugars Limited and The NCS Sugars Limited were economically not viable. Positive NPV and BC ratio of more than unity for EID Parry (India) Limited (3.488) indicated its economic viability. Internal Rate of Returns was 52.08, which was greater than the market rate of interest, so the project is considered as profitable and economically viable. Backward integration methods followed by sugar factories in NCZ of Andhra Pradesh is varying. The cane was purchased directly from contract farmers and payment was made through online by The Chodavaram Cooperative Sugars Limited and The NCS Sugars Limited, whereas, the cane was purchased directly from the contract farmers (66.67%) and through middlemen from non- contract farmers (33.33%) by EID Parry (India) Limited. The Chodavaram Cooperative Sugars, NCS Sugars Ltd. and EID Parry (India) Ltd. were provided seed upto, 66.67, 50 & 66.67; fertilizer/pesticides upto, 80, 0 & 43.33; technical guidance upto, 100, 50 & 60; transportation upto, 66.67, 50 & 100 percentages respectively. ID Parry (India) Ltd. provided credit facilities upto 40 per cent & mechanical harvesters upto 33.33 per cent farmers and remaining two factories did not provide any mechanical harvesters & credit facilities. The farmer’s
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satisfaction was highest in EID Parry (India) Limited followed by The Chodavaram Cooperative Sugars Limited (33.33%). and The NCS Sugars Limited (0%). For the identification of most important problem faced by cane growers and factories, RPI was employed. The most important constraint in sugarcane cultivation in the North Coastal Zone was shortage of labour (RPI = 0.89) followed by cane price (0.62), delay in payments (0.51), pest and diseases (0.32), high cost of cultivation (0.30), long duration of crop (0.26) and irrigation (0.12).The sugar factories in North Coastal Zone faced high cost of production (0.93) as biggest constraint, followed by scarcity of labour (0.87), problems of faulty government policy (0.33), low rate of recovery (0.33), lower yields of sugarcane (0.27), import/export policy (0.20) and levy sugar obligation (0.07).
The policy suggestions emerged from the study are; as there is poor liquid assets with the sugar factories, especially with cooperative factories, government should provide short term financial assistance. Similarily sugar factories should produce up-to their maximum installed capacity, if any shortage of cane is occurring in this process, the cooperative sugar factory should purchase cane from non-contract farmers also. The sugar factories should be regular in payments to cane growers. To overcome the shortage of labour during critical operation of sugarcane cultivation Government/ Sugar factories/ CHCs should provide farm machinery on subsidy basis.
Description
ECONOMIC VIABILITY OF SUGAR INDUSTRY IN NORTH COASTAL ZONE OF ANDHRA PRADESH STATE