Sugar refinery initiative to boost revenue goes in vain

With just six months remaining before the extended tenure of a seven-year project – albeit it made only 16% progress – ended, the planners flip-flopped on it, stating it not feasible, and suggested a new assessment to take up a fresh project instead.

In 2014, the government took up the project to generate power through co-generation and refine raw sugar at North Bengal Sugar Mills Limited, aiming at making the chronic loss-maker mills profitable. 

But in January this year, the Project Evaluation Committee (PEC) of the Planning Commission in a meeting suspended the project titled "Power Generation in co-generation method and installation of Sugar Refinery at North Bengal Sugar Mills" and came up with a directive to conduct a new feasibility study. 

The industries ministry is now conducting a new feasibility study to take up a new project, said sources at Bangladesh Sugar and Food Industries Corporation (BSFIC).

Project sources say the government backtracked on the project because electricity generation using bagasse, fibre remaining after the extraction of the sugar-bearing juice from sugarcane, is costly and the sugar mill is very far from a sea port.

Md Humayun Kabir, managing director at North Bengal Sugar Mills, said "The cost of power generation through re-generation method will be costly and bagasse will not be available all year round too. So, it is not feasible to continue with the plan."

Besides, setting up a sugar refinery is not viable too as transportation of raw sugar to the mill will cost more as there is no river port nearby it. 

"We will not be able to stay competitive at the market by spending extra on refining sugar as we will have to sell it at market prices despite higher production cost," he added.

The BSFIC had been tasked with implementing the Tk324 crore project, initiated by the industries ministry. As of March 2021, the project could make only 16% progress with Tk9.73 crore expenses on it. The project, which was initially supposed to end in 2016, had been extended to June 2021. 

Sources said several vehicles were purchased for project implementation and other related work. Besides, necessary equipment was procured, which now remained unused for the project's suspension. 

According to the project document, the project's main objective was to generate power using bagasse and add additional power to the national grid after meeting up the mill's own demand, which would help mitigate power deficit to some extent. It was also thought that power generation this way would help the mill become profitable. 

Machinery procurement was the major component of the project for installing co-generation, sugar refinery, distillery, biogas and bio-compost plants. 

Private sugar producers dominate the market

The 15 government sugar mills have long been producing sugar through crushing sugarcane, which is very costly, while private sugar manufacturers import raw sugar and refine it at a lower cost. 

City Group, S Alam Group, Deshbandhu Group, United Group and Monem Group are major stakeholders of the country's sugar market. There are now six sugar refineries in the country. 

Industry insiders say the state-owned sugar mills can produce less than 1 lakh tonnes of sugar a year, whereas the annual demand is around 18 lakh tonnes. 

Officials at a few sugar mills said sugar production through crushing sugarcane is quite expensive because they are now not getting sugar juice as per the target. That is why sugar mills have been incurring losses year after year as they are unable to balance expenditure with revenue.

Against this backdrop, North Bengal Sugar Mills Limited had started setting up a sugar refinery as well as a power generation plant using re-generation method, with a view to boosting revenue income. 

But eventually, the project was suspended seven years into its initiation with very poor progress as the authorities now deemed it not feasible. 

The chronic loss-maker 

The North Bengal Sugar Mills Limited, established in Natore's Lalpur in 1930, has been incurring losses year after year.  

It also manufactures by-products such as molasses, biogas and press-mud alongside sugar.

The factory's total property and assets amounted to around Tk162 crore as per the calculation till 30 June 2020.

According to the audited financial statement of FY20, the sugar mills earned Tk81.64 crore, while it suffered a loss of Tk86.17 crore excluding cost of goods sold and other expenses. The amount of losses stood at Tk94.57 crore a year ago. 

"Our cost of sugar production is much higher than selling prices. But we cannot charge extra to keep with the market price."

Md Humayun Kabir said the country's agriculture has made tremendous progress, but no varieties of sugarcane that provide more sugar juice have been developed yet.  On the other hand, sugar recovery from indigenous varieties is gradually declining. 

"As sugarcane cultivation is less than before, we have to buy sugarcane at higher prices," he added.

The bank loan burden is a major reason why state-owned sugar mills have been suffering losses, he also said adding that in FY21, the North Bengal Sugar Mills would incur a loss amounting to around Tk100 crore, of which, Tk85 crore had been spent on interest payments.