The Privatisation of Nayagarh Sugar Mill- A Right Step Towards
The Revival and Rebuilding of The Sick Enterprise


By

Jadabananda Panda
Senior Faculty
Department of Commerce
Prananath Autonomous College
Khurda, Orissa

IN
THE UGC SPONSORED NATIONAL SEMINAR
HELD IN
V.N COLLEGE, JAJPUR ROAD
 


INTRODUCTION

The present industrial environment embraces the privatisation as one of the major survival policies. May this statement not stand always true for all industries but in most of the situations it emerged successful. This article is related to the Privatisation of Nayagarh Sugar Mill, which was actually crushed under the red tapism. The Mill was in a state of closure. The Government of Orissa had taken a decision to privatise it. The ECP Industries extended helping hands and the mill became operational. In this study only the SWOT analysis has been undertaken for two periods Pre-Privatisation and Post-Privatisation.

OBJECTIVES

The Article has been written on the basis of these following main objectives: -

1. To describe about location of the industry, the company which had acquired it, the cabinet decision of Govt. of Orissa regarding the privatisation etc.
2. To  describe the Pre-Privatisation SWOT analysis
3. To describe the Post-Privatisation SWOT analysis
4. To draw the Conclusions and on that basis to give some Suggestions.

METHODOLOGY OF COLLECTION OF INFORMATION

The information is collected from both primary and secondary sources. Field visit has been made during the month of January to collect some basic information about the industry. Some of the employees and executives of the industry has been interviewed to collect information. Apart from that Internet has been searched and some information had been obtained which has been shown in the references. Mainly the Pre-Privatisation study has been made from the Secondary Sources and the Post Privatisation study has been made from the Primary Sources.

LOCATION OF INDUSTRY, NEW OWNER & GOVT. DECISION

Nayagarh is a small district in the State of Orissa surrounded by the districts of Bauda and Angul districts in the north, Cuttack and Khurda Districts in the east,and Phulbani and Ganjam in the west. The district of Nayagarh consists of the four Garajat States of Ex-States Ranpur, Nayagarh, Khandapara and Daspalla

The 1250 TCD (Ton Crushing per Day) sugar unit at Panipoila in Nayagarh district was registered in 1982 under cooperative sector and commissioned for commercial production in 1990. The management of the plant was transferred to Dharani Sugars Ltd. on contract for a period of 12 years through a management agreement in 1991. Dharani Sugars Ltd ceased operating the plant in 1998 during 1998 - 1999 crushing season. However the mill was rendered functional under cooperative sector during 1999-2000 season, up to march 2000. There after the unit was shut down for some time. On November 14, 2002, the Government of Orissa had taken a decision on its cabinet to privatise this sugar mill and finally on 2nd Dec.2003, the Cabinet Committee on Disinvestment (CCD) okayed the sale of Nayagarh Sugar Mill to ECP Industries Limited at Rs.5.22 crores.

ECP Industries is an Orissa based industrial house with diversified interests & experience in operating plants and manufacturing units. ECP Industries Ltd was incorporated in 1983 as Eastern Cylinders Pvt Ltd for manufacture of domestic LPG cylinders with an installed capacity of 4.5 lakh cylinders per annum. With years of dedicated effort, the company has transformed itself into a multi-product, multi-unit company.  With the consolidation of its well-diversified business activities, the company was re-christened as   "ECP Industries Ltd" in 1998. It took over the Sugar Mill under "Sale and Purchase" agreement of "Nayagarh Co-operative Sugar Industries Ltd" signed on 20.06.2004 and renamed the unit as Nayagarh Sugar Complex Ltd. New team was brought in, contacts re-established with sugarcane cultivators and the factory commenced crushing operations on 28th Nov., 2004.

PRE-PRIVATISATION - SWOT ANALYSIS OF NAYAGARH CO-OPERATIVE SUGAR INDUSTRIES LTD.: -

Adam Smith Institute of Bhubaneswar had conducted an Agro Technical Review of such sugar mill in April 2003 and submitted a report to the Government of Orissa. According to that report "Though Nayagarh District in Orissa is endowed with abundant irrigation potential, rich and suitable soils for Cane Cultivation and does not have alternative Competitive Crop for Sugar Cane, the non-performance of Nayagarh Co-operative Sugar Industries belied the expectations of the general public in bringing about socio-economic upliftment and lives of the people of the area."  According to them the main reasons are due to the following.

* Lack of full utilisation of production capacity.
* Lack of encouragement and training to sugarcane cultivator.
* Occurrence of abnormal reasons like breakdown of machinery during crushing seasons.

On the basis of that study a SWOT Analysis had been prepared: -

A. STRENGTHS

* Nayagarh Co-operative Sugar Industries is located in a traditionally Sugar Cane growing area, hence, the problem of raw material my not arise.
* The soils and the agro-climatic conditions and adequate ground water facility etc. are conducive to sugar cane growing.
* The farmers, the workers and the general public are strongly in favour of revival of the plant.
* The plant and machinery is generally in good state of health and has a life of another 18 to 20 years.
* All liabilities cleared by Govt. of Orissa.

B. WEAKNESSES

1.  Non-operation of the plant at viable capacity caused huge financial losses and resulted in erosion of Net worth.
2. There was an objection in the report that the stipulated norms of govt of India with regards to the improvement of efficiencies had not been followed.
3.  The farmers were being neglected in getting financial assistance, their prices against supply of sugarcanes and also proper training for cultivation.
4.  A very poor rapport built up between the management, sugar cane growing community and the workers failed to develop fraternity.

C. OPPORTUNITIES:

1) Availability of adequate reserves of ground water potential and other irrigation resources in the zone, affords scope for augmenting area and production of sugar cane.
2) As no competitive cash crop exists to sugar cane, if the farmers are supported with proper subsidies and incentives, they are willing to produce sugar cane and supply to mills.
3) The richness of soil and availability of huge tracts of uncultivated lands affords the possibility of raising sugar cane crops to enable the Sugar Mill capacity to be increased in future.
4) Due to inadequate infrastructure existing in the area, diversification to establish an agro complex producing down the line products can be planned.

D. THREATS:

i)  Lack of full capacity utilisation may lead to sugar Cane diversion to Jaggery manufacture and supplies to near by sugar mills.
ii)  Higher sugar production depends upon high yielding variety of Sugar canes and for that purpose the farmers should be given necessary financial help and training facilities.
iii)  Unless the crushing capacity is established and the farmer gets confidence that his produce can be exhausted in a reasonable period of time, it will be difficult to convince the farmer to grow sugar cane.
iv)  Unless the farmer confidence is reinstated by ensuring prompt payment of cane price, it will be difficult to achieve 100% capacity utilisation and make the venture economically viable.
v)  Unless a new work culture is introduced in the plant by making the workers understand the importance of making the plant operate at optimum level, and on this aspect alone their future survival depends, the plant may disintegrate earlier than its life.
vi) The direct impact of higher overheads will have a bearing on the cost of conversion and hence on the economic viability of the venture.

POST-PRIVATISATION - SWOT ANALYSIS OF NAYAGARH SUGAR COMPLEX LTD

A. STRENGTHS

1. The plant is bestowed with a calm and cool environment at the foot of a hill.
2. The soil of the area is light sandy and therefore not prone to water logging, thus suitable for sugarcane cultivation.
3. The Agro-climatic condition is suitable for accumulation of sucrose in cane.
4. The company has got its tie up with 23 banks to provide finance to the farmers on a tri-party agreement.
5. The industry is joining hands with Krishi Vigyan Kendra to increase the production of Sugar cane.
6. An amount of nearly 5 crores has been invested to upgrade its machineries till today. Lots of change has been made in the Meal Section, Boilers, Boiling House and the Sugar House to achieve better recovery levels and quality of sugar.
7. Subsidised Housing, Canteen, Recreational and Communication facilities are provided to the employees.

B . WEAKNESSES

1. There are some hidden liabilities like sales tax, excise duties, electric bills etc.
2. The communication facility is very poor especially the approaching road which causes problems for the transportation of sugar cane and also sugar.
3. The fixation of purchase price of sugar cane and the selling price of sugar is beyond the control of industry.
4. Defunct Major and Minor Irrigation projects may cause troubles for sugar cane production.
5. Imposition of Toll Tax on the farmers providing inputs to a sick industry by RMCS.

C. OPPORTUNITIES:

1. The revival of Panipoila reservoir may be a major source of water supply for the industry.
2. The factory is going to start an Agro-Clinic / Call Centre during the season 2005-06, which will guide the farmers for adopting better plantation procedures, seeds, fertilizers & pest control procedure.
3. ID Cards and Kishan Credit Cards are being provided to the sugar cane producers.
4. The sugar cane variety Co86032 is a popular variety and is grown on large parts in Tamilnadu and Maharastra. Apart from that varieties like 85A261, 87A298, 93A145, 83B96, Co7219, Co7805, Co86052 are High Sucrose , High yield, Pest and Disease remedy varieties. Our state should accept, approve the cultivation of such varieties.

D. THREATS:

1. Faulty system of electric supply, lack of timely action by the supplying company may lead to huge financial loss.
2. Power crushers and the local jaggery sectors are creating problems for the industry by diverting some amount of sugar cane. Some of them are producing Country Liquor and local alcohol to earn easy money, not only putting the sugar industry in trouble, but also causing a huge revenue loss to the Government.
3. Lack of timely repair of Minor and Major Irrigation projects may cause problems for the factory.

CONCLUSION & SUGGESTIONS

The privatisation of Nayagarh Sugar complex is a welcome step of the State Government. The industry had got a new shape, a number of persons get employment, sugar cane farmers get their livelihood and above all costly plant and machinery were saved from destruction. On the basis of the study the following suggestions may be given

1. The Regional Marketing Cooperative Society should not impose Toll tax on the farmers.
2. The Govt. of Orissa should accept and approve the high sucrose content varieties of Sugar cane as suggested by Regional Agricultural Research Station, Anakapalli, Andhra Pradesh.
3. The defunct Minor and Major irrigation projects should be repaired as and when it needs so.
4. The Approaching Roads should be properly repaired in order to make the transportation smooth and easy.
5. Uninterrupted power supply system should be provided to the industry as the product is coming under the category of essential commodity act.

REFERENCES

1. Mr.P.V.L.Narasimham B.Sc, ANSI, FSTA, MIICheE  & Mr. B.V.R.Poorneshwar Rao B.Sc (Agri) - Revival of Nayagarh Sugar Mill: Agro-Technical Review -  Department of Public Enterprises Government of Orissa
2. Bisoi Dilip Privatisation efforts stepped up The Financial Express- Jan.-2-2007.
3. CCD okays sale of IDCOL, Cement & Nayagarh  Sugar --  http://orissagov.nic.in / public enterprises /pressclip1.htm
4. Mallick Biswanath, O.A.S. -
Cultural Heritage of Nayagarh
5. Interaction with the management of The Nayagarh Sugar Complex Ltd. - 12th Jan-2007
6. Interaction with some of the employees of The Nayagarh Sugar Complex Ltd 12th Jan- 2007.
7.  About ECP industries Ltd - http://www.ecp-industries.com/
 


Jadabananda Panda
Senior Faculty
Department of Commerce
Prananath Autonomous College
Khurda, Orissa
 

Source: E-mail January 18, 2007

       

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