CHAPTER NO.

IV
COST OF PRODUCTION OF SUGAR FACTORY
4.1

Introduction :
The sugar industry is becoming competitive day-by-day as the demand for

sugar consumption is increasing. In present sugar Factory scenario, the study of

cooperative sugar factories in Kolhapur District is vital study. Our main criteria is to
focus on variable cost which is controllable. Therefore, total cost is segregated into
cash conversion cost and fixed cost to arrive at total cost of production.
This chapter gives the basic concepts of cost of production, maintenance for
productivity in sugar plants, factors affecting the cost of production of sugar,
information about co-products, Techniques for producvity improvement, cost
reductions etc.
4.2

Cost of Production
Cost of production of sugar is the sum total of all expenses incurred in the

production of sugar. For eg. Cane Price, H & T Exp, purchase Tax, etc. and second
part of production is cash conversion cost. In conversion cost incurred power exp,
chemicals and consumables, salary & wages, packing, repairs and maintenance,
overheads, Depreciation and Interest etc.
4.3

Factors Affecting the cost of production of sugar

1) Recovery :- Which is the ratio of sugar produced to the cane crushed.

The quality and maturity of cane crushed will determine the recovery. The
cost of sugar produced by two factories with identical capacity will be different if the
recovery is different. Recovery varies from unit to unit and within the same unit from
year to year. While the minimum cane price fixed by the Govt. from unit to unit and
within the same unit from year to year. While the minimum cane price fixed by the
Govt. from time to time is based on a uniform recovery of 8.5% the actual price paid
is adjusted pro-rata to the variation in the recovery percentage.
Recovery depends again on the agricultural practices followed in the area
2) Duration :- Which is the number of crushing days of say 22 hours per day. The
availability of cane within a reasonable distance from the sugar factory and the
competitive demand in the area determines the duration. It is also dependent on the
ability of the sugar factories to attract cane at a price in preference to the competitive
users of sugarcane like gur and Khandsari manufactures. The cost of sugar produced
100

in two factories with identical capacity will be different if the duration of crushing in
a season varies. Higher the duration, higher will be the production of sugar which will
result in lower cost due to distribution of fixed cost over a larger volume of
production.
3) Capacity of production :- The installed capacity of the sugar plant and the actual
utilization of the installed capacity have a bearing on the cost of production of sugar.
The higher the installed capacity, the capital cost per tonne of sugar production is
likely to be lower. The better the capacity utilization, the lower the fixed cost per
tonne of sugar produced.
4) Age of the Plant :- The age of the plant determines its efficiency in operation. It
has also its impact on depreciation and return on capital employed. While older plants
will have lower depreciation and capital employed, it will also have lesser efficiency
in operation. New plant will have a higher impact on depreciation and capital
employed and at the same time its operational efficiency will be much better.
5) Process employed in the production of sugar :- While carbonization plant will
have higher cost of production, sulphitation plants will have comparatively lower cost
of production. At the same time the extra cost of carbonization is generally offset by
the higher realization from the sale of sugar of superior grade.
4.4

Maintenance For Productivity In Sugar Plants :The sugar industry in an agro based seasonal industry and interruption due to

bad mechanical working during season not only results in low capacity utilization but
the raw material being perishable also deteriorates rapidly. The time loss during the
season may mean production loss. There fore in a sugar factory plant maintenance
assumes much significant importance as lack of planning and lackadaisical attitude of
maintenance staff in their respective area leads to higher maintenance cost, excessive
storage stores of spares and engineering stores, high overtime besides production loss.
The management has become cost conscious in the days of limited
profitability due to increase in the price of raw material, high cost of other material,
production loss etc the utility of latest development in the field of maintenance is
receiving attention. Thus an aim is to keep the downtime minimum amongst others
things while running the plant. In many sugar plants proper maintenance system does
not exist and people are still in the habit of attending the machines only when there is
a break down. Barring a few mills there is a tendency, in general not to stop the
machinery for regular maintenance and making small investment over that with, the
101

result machinery is run to death. This tendency is anti productive and concept is
totally wrong. So there should be change in entire outlook. Other hand in similar
condition a better maintained plant gives better capacity utilization without increasing
extra expenditure and losses are reduced to optimum level. It is there fore all the more
necessary to take suitable actions including evolving a good maintenance system so
that downtime remains within reasonable limits.
1) Present Status of Maintenance
-

There is no predictive/preventive maintenance system.

There are no records of individual equipment about make, cost, supplier's

name and detailed specification.

There is no system of keeping descriptive records, cost records about the

repair done on different item of Machinery

There is no proper training programme for skilled labors / supervisory staff.

There is no proper house keeping works.

There is no regular plant safety and productivity committee.

A separate inspection cell does not exist.

2) Factors need to be Considered :1) Sugar factory is a seasonal and continuous process factory. Season period is
limited. Any shortfall in capacity utilization due to interrupted working will
adversely effect the profitability of the unit.
2) There is no separate full - fledged maintenance department. There are two
categories of workers. One Coming in shifts and the other comes in general shift
who are responsible for maintenance in the crushing season.
3) Heavy corrosion of metal takes place if proper PH is not maintained and cause
reduction in the life of plant and machinery. Sometimes excessive corrosion
increases the downtime ultimately resulting in loss of production.
4) The existing staff and labour are not imparted adequate training with the result
they have not developed capability and ability to adopt modern engineering
functions.
3) The Raw Cane Sugar Factory :The flow sheet of a typical raw sugar factory is given in Fig 4.1. to show the
interdependence and relative importance of the various departments of the factory and
of their products.
Apart from sugar the factory produces the following by products.
102

Bagasse (Surplus)

Molasses

Filtermud

Furnace ash

Electricity (Surplus)
On the average for every 100 metric tonnes of cane ground the factory will

produce.
11.2 tonnes Raw Sugar (95.5 pol)
5.0 tonnes Surplus bagasse (at 49 % moisture)
2.7 tonnes Molasses (89 Brix, sp.gr. 1.47)
3.0 tonnes Filter mud (at 80 % moisture)
0.3 tonnes Furnace ash
1300 KWH Surplus Electricity
These figures are only indicative and are based on a number of assumption
such as ; sucrose % cane, 13.0 fibre % cane, 13.0; Mill extraction, 95 %; overall
recovery, 85 %, purity of mixed juice, 84.0 %; steam consumption, 500 kg per tonne
of cane, 2.3 tonnes of steam generated per tonne of wet bagasse.1
Returning to the main by - products, it is useful, in order to clarify our ideas,
to make a rough estimate of their value to the sugar producer. Flow diagram of a raw
sugar industry is as follow.

103

The Raw Cane Sugar Factory

Cane Supply

Cane Milling

Bagasse

Lime
Boiler
Plant

Mixed Juice
Fresh
Water
Juice heaters

Live
Steam

Acid
Condensate

Exhaust
Steam
Electric
Power
Plant

Clarifier
Pure
Condensate
Evaporator
Rotary
Filter
Barometric
Condensers
Vacuum Pans
Coating
Water

Electric
Prime
Movers

Crystallizers
Warm
Water
Centrifugals
Coating
Pond

Surplus
Bagasse

Furnace
Ash

Final
Molasses

Sugar

Fig. No. 4.1 : Flow diagram of raw sugar factory.

104

Surplus
electricity

Filter
Cake

By- Products
Electrity
Utilization
on as fuel

Charcoal briquqtes
Methane and Producer gas
Pulp and paper

Fiber
Products

Paper board
Fibre Board
Particle Board
Furtural

Bagasse

Alpha Cellulose

Cane tops
and
leaves

Miscellaneous

Plastics
Poultry litter and muten
Animal feed
Bagasse Concrete

Fortiliser

Soil amedment
Animal
feed

Filter
Mud

Sugar
cane

Sugar

Exportion
Direct
Utilization

Wax and
fats

Fertiliser
Animalfeed
Rum

Furnace
ash

Molasses

Distilling
industry

Ethyl alcohol
Rectificed spirits
Power alcohol

Protein from
cane juice

Alcohol Derivatives
Vinegar and acetic acid
Acetonebutanol
Others
fermentation
industries

Citric acid
Lactic acid
Glycerine
Yeast
Aconitic acid

Miscellaneous

Monosodium
Glutamate
Dextran

Fig. No. 4.2 By Products of the cane sugar industry.

105

From Fig No. 4.2 indicates that the by products of cane sugar which have found an
industrial utilization, and the two main raw materials are bagasse and molasses.
4.5

Sugarcane Co-Products :In the year 2010 the International society of sugar cane Technologists (ISSCT)

have renamed the by - products of the cane sugar industry as Coproducts, due to the
reason that these so called by - products are equally important as the end product
(sugar) itself and hence, they can be termed as Co- product's.2
Sugarcane as a 'Wonder Crop' due to the reason that many value added
products can be manufactured from sugarcane and its Co - Products. Sugarcane is also
considered as an 'Energy Crop' as it is a source of many forms of energy; That is why,
many cane sugar producing contries particularly those located in the Latin - American
and Caribbean Countries have adopted Integral utilization of sugarcane and its Co Products. The Co- products of sugarcane are as follows.
A. Field Co - Products 1) Green leaves of sugarcane Normally green leaves of sugarcane are used as cattle feed. But as cattle relish
green colour of the leaves, which is present only during the cane harvesting period. In
some countries (Mauritius) the green colour of the leaves is preserved by heaping up
the green leaves, drenching them with a solution of molasses and urea and covering
the heaps with tarpaulins. In some other countries (china, Taiwan) the green leaves
are chopped into bits and mixed with other ingredients of cattle feeds like grain, Oil
cakes yeasts etc. and packed into polytnene bags to be used as cattle feed round the
year.
2) Dried leaves of sugarcane (Trash) Dried leaves of sugar cane (Trash) were earlier used for mulching in order to
prevent the evaporation of water from the fields. It was also burnt in the fields in
order to avoid any fire hazard. It is also believed that by this practice of burning, pests
and diseases are eradicated and the ash so formed add small quantities of fertilizers to
the field.
But in the recent years the scientists have realized that the fuel value (Calorific
Value) of trash is equal to that of mill wet bagasse (4180 Kcal/kg or 7540 Btu/Lb) and
hence, one tonne of trash can generate as much steam as one tonne of mill wet
bagasse can generate (about 2.5 tonnes of steam) Due to this realization of the fuel
value of trash, moblie baling equipment has been developed in Belgium, France and
106

Germany known as Hay Balers. These are quite suitable for baling trash in the fields,
reducing its bulk density and also helps to reduce the incidence of transport charges
and bring the bales of trash to the sugar mills for using it as fuel in the boilers. Two
firms in India also have started fabricating Trash balers and many sugar mills are
using them advantageously. Trash has proved as a very promising fuel for the off
season to continue generation of steam and thereby co-generation round the year.
Thus in the recent years the pattern of utilization of trash has changed and its fuel
value is being exploited fully.
3) Factory Co-Products :a) Bagasse
Now a days the sugar mills are not prepared to sell their surpuls bagasse to the
paper mills. They are selling surplus bagasse to neighbouring sugar mills, which have
cogeneration projects, as they pay more for surplus bagasse, which they can
advantageously use as fuel in the boilers.
In the recent years many sugar mills have introduced energy conservation
measures by which they have reduced the consumption of steam and there by reduced
the consumption of bagasse as fuel. The sugar mills have installed high pressure
boilers (1500 Psing and 950 F temperature) and multi stage steam turbines coupled
to power generatiors to generate electric power efficiently with less steam and thereby
saving lot of bagasse for using it during the off season to generate steam and keep the
cogeneration going on round the year.
b) Molasses :Every one connected with the sugar industry is well aware that though
molasses can be used for the manufacture of many chemicals, molasses is best used
for the manufacture of ethyl alcohol by fermentation and distillation. This is an old
age practice.
In the recent years, as ethyl alcohol is being used as fuel in the automobiles,
More efficient methods have been developed to manufacture ethyl alcohol from
molasses. Some of these efficient methods are 1) Continuous fermentation of
molasses. 2) Use of improved strains of micro organisms to bring about quick
fermentation of molasses with high yields of alcohol. 3) Adoption of pressure
distillation to reduce the consumption of steam for distillation 4) Molecular sieve
technology to dehydrate rectified sprit efficiently for using the anhydrous alcohol to
admix with petrol and use it as automobile fuel. All these improved technologies have
107

resulted in more efficient methods for producing ethyl alcohol from molasses in short
duration.
c) Distillery Effluents :In the earlier years distillery effluents were simply let out into the nearby
canals, rivers etc. to be used as irrigation water for the sugarcane crop. This was
leading to pollution problems.
Now a days, same distilleries are mixing the distillery effluents with press
mud and using it as compost having more NPK to be used as fertilizer in the
sugarcane fields.
In many distilleries, the effluents are used in the bio digesters for generation of
biogas (60 % carbon dioxide and 40 % Methane gas) and this gas is used as fuel in the
boilers. By adopting methods to enrich the methane content of the biogas, the gas can
be used as fuel in internal combustion engines, as is being practiced in Brazil. Two
such plants are also being set up in India.
d) Press Mud :In the earlier years, press mud was being used as manure in the sugarcane
fields. In the recent years, a few sugar mills in the state of Tamil Nadu are generating
biogas from press mud and using it as domestic fuel and in the laboratories. It is
advantageous for other sugar mills also to adopt this practice.
e) Chimney Gases :The chimney gases generated by burning bagasse as fuel in the sugar mill
boilers contain about 12 to 14 % carbon dioxide. Emission of carbon dioxide gas,
otherwise known as 'Green House Gas' into the atmosphere is injurious to the
evironment. In countries like Pakistan, South Africa, Japan, Chimney gases are being
scrubbed with water to remove the suspended particles and the resultant gas is
bubbled through cane juice to clarify the limed juice. Thus installation of lime kilns to
generate carbon dioxide gas is avoided. Use of chimney gases as clarification agent
results in arresting environmental pollution also with chimney gases.
f) Sugar Factory Effluents :Though sugar mill effluents have been in use all these years as irrigation water
in the sugarcane fields, in a few sugar mills, Sugar mill effluents are mixed with
distillery and used for generation of biogas, to be used as boiler fuel.

108

Adoption of improved scientific practices in the recent years have changed the
pattern of utilization of the Co - Products of cane sugar industry in an advantageous
manner, and reduction of cost of conversion.
Production of sugar in India shows large cyclical fluctuations. This creates
unhealthy imbalance which not only affects economy of the sugar industry directly
but availability of by - products like bagasse and molasses touches extreme low and
high levels. For healthy growth of the by product, utilising industries stability of the
sugar industry is very important.2
4.6

Cost of Production :Due to the cyclic nature of the sugar industry, the area under sugarcane

cultivation sugarcane production as well as sugar production has been drastically

reduced during the year 2008 - 09 in India in comparison to immediate previous
years. The following table indicates the cyclic nature.
Table No. : 4.1
Sugar Production in India (2006-07 to 2008-09)
Area
Year

under
sugarcane
(Lac hr)

Production
of
Sugarcane
(Lac
Tonnes)

No. of
factories

Average

in

(days)

operation

Total

Total

Cane

sugar

crushed

production

(Lac

(Lac

tonnes)

tonnes)

2006-07

51.51

3555.20

504

173

2792.95

283.67

2007-08

50.55

3481.88

516

149

2499.06

263.57

2008-09

44.15

2850.29

488

87

1449.78

145.38

Source - Financial Performance of Co - Op sugar factories in Maharashtra VSI Pune Year 2008 - 09

The country's sugar production is decreased by 118.19 Lac tonnes against

previous season whereas the consumption of sugar is increased 220.00 lack tonnes to
230.00 lac tonnes. Therefore, there is a mismatch of production and consumption of
sugar, which results in increase of sugar price. The sugar industry is becoming
competitive day by day as the demand for sugar consumption is increasing. Therefore,
Promoting cost consciousness to be competitive is a need of the hour and this study
will focus some light for future action for those are concerned in this industry.
During the crushing season 2008 - 09, 146 sugar factories were in operation
including 28 private sugar factories in Maharashtra.
109

Total cost is segregated into cash conversion cost and fixed cost to arrive at
total cost of production. The cash conversion cost includes the elements of cost like
power, chemicals and consumables, salary and wages, packing Materials, repairs and
maintenance and overheads. The fixed cost includes interest and depreciation.
4.7

Cost Analysis Of State

The element wise cost of production of sugar per quintal are analyzed for the

financial year 2008 -09 and salient features are given as under.
1) Cane Cost The cane cost includes cane price, Harvesting and Transportation (H&T)
expenses and cane purchase Tax (PT)
i) Cane Price The average cane price per tonne of cane paid during last seven years is given
as under.
Table No. : 4.2
Cane Price.
Particulars 2003-04 2004-05

2005-06

2006-07 2007-08

2008-09 2009-10

Avg.Cane
Price (Rs.

879.19

1310.71

1406.29

939.16

934.17

1580.46

2359.34

49.46

61.56

63.64

56.93

55.69

64.55

70.53

Pertonne)
% to total
Cost

of

production
Source - Financial performances of VSI, year 2003 - 04 to 2009 - 10

Table No. 4.2 Indicates that, due to lower selling price of sugar during the year 200607, average cane price is decreased, During 2008 - 09 and 2009-10, the cane price as
well as the percentage to total cost of production is highest among last five years.
ii) H&T Expenses :Table No. : 4.3
Harvesting and Transports
Particulars 2003-04 2004-05

2005-06

2006-07

2007-08

2008-09 2009-10

Avg.H&T
cost

(Rs.

203.66

187.34

248.25

240.71

238.14

248.77

302.84

11.46

8.80

11.23

14.59

14.20

10.16

9.05

Pertonne)
% to total
Cost

of

production
Source - Financial performance of VSI, year 2003 - 04 to 2009 - 10

110

Table No. 4.3 indicates that, the average H&T cost is in the range of Rs. 238.14 to
Rs. 248.77 during last five years, Though it was below Rs. 190.00 during 2004 - 05

iii) Cane Purchase Tax :Table No. : 4.4

Cane purchase Tax
Particulars 2003-04 2004-05

2005-06

2006-07

2007-08

2008-09 2009-10

Avg.
Purchase
tax

(Rs.

N.A.

45.54

45.03

5.84

23.70

45.26

69.52

0.00

2.14

2.04

0.35

1.41

1.85

2.08

Pertonne)
% to total
Cost

of

production
Source :- Financial Performance of V.S.I year 2003 - 04 to 2009 - 10

Table No. 4.4 Indicates that the purchase tax was waived during 2006 - 07 season and
it was reintroduced in 2007 - 08
iv) Cane cost
Table No. : 4.5
Cane Cost
Particulars 2003-04 2004-05

2005-06

2006-07 2007-08

2008-09 2009-10

1603.59

1699.57

1185.71

1196.00

1874.50

2731.70

72.50

76.91

71.88

71.31

76.59

81.66

Avg.Cane
Cost (Rs. 1082.85
Pertonne)
% to total
Cost

of

60.91

production
Source - Financial Performances of VSI year 2003 - 04 to 2009-10

Table No. 4.5 : Indicates that the average cane cost during 2008 - 09 is the highest
among last five years. The average cane cost includes cane price, H&T and cane
purchase cost.
2. Cash Conversion Cost The average cash conversion cost per quintal of sugar for last seven years is
given below.
111

Table No. : 4.6

Cash conversion cost.
Particulars 2003-04

2004-05

2005-06

2006-07 2007-08 2008-09 2009-10

310.31

299.80

273.88

264.99

258.66

339.69

371.64

19.84

17.15

14.97

18.70

18.44

16.31

12.98

Avg. Cash
conversion
(Rs.QTL)
% to total
Cost

of

production
Souree - Financial Performance of VSI, year 2003 - 04 to 2009 - 10

Table No. 4.6 Indicates that the average cash conversion cost per quintal of sugar of
the Maharashtra State during 2008 - 09 comes to Rs. 339.69, Which is increased by
Rs. 81.03 as compared to previous year. This increase is due to increase in all
elements of cash conversion cost compared to last year.
3. Conversion Cost Conversion cost includes Depreciation and Interest. The average conversion
cost per quintal for last seven years is as follows.
Table No. : 4.7
Conversion Cost
Particulars 2003-04 2004-05

2005-06 2006-07 2007-08

2008-09 2009-10

Avg.
Conversion
cost

(Rs.

611.99

480.90

422.35

398.37

402.44

488.33

524.73

39.09

27.51

23.09

28.12

28.69

23.44

18.33

/Qtl)
% to total
Cost

of

production
Source - Financial performance of VSI, year 2003-04 to 2009-10

Table No. 4.7 : Indicates that, there is an increase in average conversion cost per
quintal during 2008 - 09 of Rs. 85.89 as compared to previous year. Though amount wise increase per quintal is more, percentage - wise it is less as compared to last year
mainly due to higher cane price.

112

Table No. : 4.8

Comparative statement of element-wise average cost per quintal of sugar of sugar factories in Maharashtra.
2003-04
Above

Sr.

Particulars

No.

90%
Cap.Uti
z.,(Rs.)

1)

% to
total
Cop

2004-05
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

2005-06
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

2006-07
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

2007-08
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

2008-09
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

2009-10
Above
90%
Cap.Uti
z.,(Rs.)

% to
total
Cop

CANE COST
Cane Price

774.40

49.46

1076.30

61.57

1164.29

63.64

806.66

54.94

781.29

55.69

1344.54

64.55

2018.87

70.53

H & T Exp

179.39

11.46

153.84

8.80

205.53

11.23

206.75

14.59

199.16

14.20

211.64

10.16

259.14

9.05

0.00

0.00

36.93

2.11

37.28

2.04

4.97

0.35

19.93

1.42

38.41

1.84

59.52

2.08

953.79

60.91

1267.07

72.49

1407.10

76.91

1018.38

71.88

1000.38

71.31

1594.59

76.56

2337.53

81.67

Power

9.40

0.60

8.98

0.51

5.63

0.31

5.87

0.41

5.68

0.40

6.40

0.31

7.83

0.27

Chemicals consumables

14.68

0.94

13.77

0.79

14.14

0.77

15.36

1.08

18.78

1.34

23.66

1.14

19.30

0.67

Salary & wages

34.18

2.18

127.51

7.29

102.65

5.61

95.76

6.76

99.16

7.07

131.91

6.33

151.27

5.28

Packing

114.13

7.29

38.64

2.21

40.74

2.23

40.51

2.86

35.91

2.56

41.66

2.00

48.29

1.69

Repairs & Maintenance

51.77

3.31

30.35

1.74

44.02

2.41

48.45

3.42

52.54

3.75

70.61

3.39

72.33

2.53

Overheads

86.55

5.53

80.55

4.61

66.70

3.65

59.04

4.17

46.59

3.32

65.45

3.14

72.62

2.54

Total Cash Conversion Cost

310.71

19.84

299.80

17.15

273.88

14.97

264.99

18.70

258.66

18.44

339.69

16.31

371.64

12.98

3)

Depreciation

53.71

3.43

42.93

2.46

49.56

2.71

33.85

2.39

33.60

2.40

38.92

1.87

51.22

1.79

4)

INTEREST
Working Capital

139.29

8.90

72.08

4.12

50.32

2.75

55.33

3.91

72.40

5.16

69.69

3.35

56.08

1.96

Term Loan

71.37

4.56

40.00

2.29

24.11

1.32

27.33

1.93

24.83

1.77

22.89

1.10

27.31

0.95

Deposits

36.91

2.36

26.09

1.49

24.48

1.34

16.87

1.19

12.95

0.92

17.14

0.82

18.48

0.65

Total Interest

247.57

15.81

138.17

7.90

98.91

5.41

99.53

7.03

110.18

7.85

109.72

5.27

101.87

3.56

Purchase Tax
Total cane cost
2)

CASH CONVERSION COST

113

2003-04
Sr.
No.

Above
Particulars

90%
Cap.Uti
z.,(Rs.)

% to
total
Cop
39.09

2004-05
Above
90%
Cap.Uti
z.,(Rs.)
480.90

% to
total
Cop
27.51

2005-06
Above
90%
Cap.Uti
z.,(Rs.)
422.35

% to
total
Cop
23.09

2006-07
Above
90%
Cap.Uti
z.,(Rs.)
398.37

% to
total
Cop
28.12

2007-08
Above
90%
Cap.Uti
z.,(Rs.)
402.44

% to
total
Cop
28.69

2008-09
Above
90%
Cap.Uti
z.,(Rs.)
488.33

% to
total
Cop
23.44

2009-10
Above
90%
Cap.Uti
z.,(Rs.)
524.73

% to
total
Cop

5)

Conversion Cost (2+3+4)

611.99

6)

Total Cost of Production (1+5)

1565.78 100.00 1747.97 100.00 1829.45 100.00 1416.75 100.00 1402.82 100.00 2082.92 100.00 2862.26 100.00

7)

No. of factories in operation

136

102

142

163

173

145

142

8)

No. of Factories submitted

79

67

81

95

98

84

86

17

35

76

85

55

56

29

10

33

46

43

35

34

audited Annual Reports.

9)

No. of factories crushed more

than average capacity

10)

No. of factories having cash

conversion cost less than Avg.
/cash conversion cost.

COP = Cost of production

Source : Financial performance of VSI, year 2003-04 to 2009-10.

114

18.33

Table No. 4.8 : Indicates that the percent of cane cost is high, The percentage of
components of cost of production of sugar for the year 2008 - 09 is mentioned in
graphical form as follows.
Percentage of total cost of Production.
Cash Conversion Cost
Depreciation

16.00 %
Cane Cost

2.00 %

77.00 %
Interest
5.00 %

Fig No. 4.3

Table No. : 4.9
The Comparative figure of Seven years of conversion cost of Maharashtra
Cane

Year

Cost %

Cash
Conversion
Cost %

Interest
%

Depreciation

Conversion
Cost

Total

6=(3+4+5)

7 = 2+6

2003-04

60.91

19.84

15.81

3.43

39.00

100

2004-05

72.49

17.15

7.90

2.46

27.51

100

2005-06

76.91

14.97

5.41

2.71

23.09

100

2006-07

71.88

18.70

7.03

2.39

28.12

100

2007-08

71.31

18.44

7.85

2.40

28.69

100

2008-09

76.47

16.34

5.32

1.87

23.53

100

2009-10

81.67

12.98

3.56

1.79

18.33

100

Source - Financial Performance of VSI, year 2003 - 04 to 2009 - 10

The percentage of conversion cost to total cost of production has been

decreased due to increase in cane cost during 2008 - 09.
4.8

Cost Reduction In Sugar Production

Cost Reduction Means to reduce the cost of production. Supply of good

quality cane reduces cost of production. This can be effected by harvesting of cane on
115

maturity basis systematic transport of fresh cane with out loss of time is necessary to
minimize losses due to deterioration. In the factory, cost of production can be
effectively reduced by:
1) Improvement in extraction by milling.
2) Improved recovery by modern process techniques,
3) Fuel economy
4) Utilization of by products.
5) Improved design of machinery and lay - out.
6) Inventory and Material control.
7) Labour control
8) Maintenance cost control.
9) Expenditure control.
10) Manufactured of row sugar for export and refining.
11) Instrumentation.
12) Co - ordinated Research.
13) Selection of Machinery and Equipment
14) Economic considerations
1) Mill Extraction
Mechanical cane unloading
System and use of automatic cane feed control ensures uniform feeding of cane.
To ensure proper preparation of cane "Preparation Index (PI)" is to be found
out regularly in each shift. Preparation Index of about 80, which is expressed in terms
of percentage of total pol in cane released in the form of broken cells, could easily be
obtained by reducing the proportion to uncut cane using the split cane carrier, high
powered cane knife drive, reversal of knives, use of shredders adjustment of clearance
between the knife tip and carrier slat etc.
High primary extraction can only be achieved by good preparation of cane,
uniform and sufficient feed to crusher. proper roller grooving, adequate hydraulic
loading and proper mill setting. Primary extraction of 65 % (on dry crushing) is
considered good. Use of "Donnelley" type chutes ensure positive feeding to rollers.
Imbibitions of 180 to 200 % on fibre at about 50 C gives satisfactory results.
Effective imbibitions is done by injecting water into the bed of bagasse throughout the
length for soaking the bagasse properly and uniformly. It can also be done by forced
imbibitions system from top as well as bottom at the points where the bagass takes a
116

turn on the Inter mediate carrier. Application of imbibition water at more than one
place, has also been reported to give better results.
Efficiency of secondary extraction depends mainly on compound imbibitions
system, roller grooving, hydraulic load on floating roller, mill setting, feeding to
rollers and power of the prime mover, which are again dependent upon mill design
and the condition of the plant.
2) Improved Recovery By Modern Process Technique.
1) Ion - Exchange Process :Ion - Exchange process for demineralisation of clarified sugarcane
juice has been developed at the National sugar Institute, Kanpur. The results of trials
conducted at factories indicated that an increase in recovery by 0.7 to 0.9 % on cane,
is obtained.3 The evaporators remain clean, molasses production is drastically reduced
and are edible.
2) Process Without the Use of sulpher :a) Defeco - Melt crystallisation (DMC) Process
The process for the production of marketable white sugar with out the use of
sulphur, popularly known as DMC process, was developed at the National sugar
Institute, Kanpur and successfully implemented in a south Indian sugar factory. Later
on the process was adopted in Maharashtra. Besides the various benefits, the cost of
production is reduced by Rs. 3/- per quintal of sugar. Some of the benefits are as
under.
1) Complete Elimination of sulphur which is an imported commodity. Lime
consumption is also reduced to half.
2) Higher recovery of sugar which is mainly on account of reduced losses.
3) Reduction in cost of chemicals and labour required for periodical cleaning of
evaporators.
4) simplicity - The cumbersome sulphitation process is replaced by simple and
heat DMC system.
5) Longer equipment life because of reduced corrosive action.
6) Sugar Quality and Variety of choice 7) Sugar produced is free from sulphate and chloride and hence suitable for
pharmaceutical and industries. Raw sugar can also be produced as and when
required.
8) Molasses produced is suitable for cattle feed.
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b) Defeco-Melt phosflotation (DMP) Process DMP Process is an improvement over the DMC Process to produce superior
quality sugar which cannot be produced by sulphitation and carbonation process. In
DMP process clarification of melt is done by addition of phosphoric acid which is
indigenously available and abundant. The process is based on the following
observations.
1) On heating defecated and air impregnated sugar melt liquor floats the
precipitate to the surface leaving the clear liquor under the froth.
2) Use of phosphate as flocculating agent results in formation of tricalcium
phosphate floc, which has the property of occlusion and absorption of
suspensoids, colloids and soluble colours. Some of these colours cannot be
successfully handled by any other method.
The DMP Process has all the benefits of the DMC Process without use of
sulphur. At the same time, it gives a superior quality sugar equivalent to refined sugar.
3) Fuel Economy
Cost of production can be appreciably reduced by making economy in fuel
consumption. Fuel economy can be achieved by efficient generation of steam in
efficient boilers, and also by economy measures in consumption of steam. Steam
consumption is reduced by vapour bleeding form the evoporators i.e. juice heaters and
vacuum pans, following the juice clarification process which reduces the scale
formation such as ion - exchange, and producing small grain size only.
4) Profitable Utilization of Bye - Products Proper utilization of bye - products gives so much profit that the Cuban sugar
Industry may consider "Sugar bye - product" of the sugar Industry.
a) By practicing fuel economy, much bagasse can be saved, which can be utilised for
producing surplus power for selling outside or bagasse can be used for making
paper.
b) Press mud is a valuable fertilizer containing undesirable wax. Wax which is a
valuable raw material for chemical industry, can be extracted from the filter mud.
This is already in practice in some factories.
c) Molasses is a raw material for alcohol industry and the recovery of potash as
fertiliser from the effluents of the distillery, solves the problem of water and air
pollution. Potash which is an imported commodity is obtained as a product from
the waste.
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5) Improved Design Design of machinery and layout plays an important role in reducing cost of
production. Besides the operational maintenance and safety aspect, it minimises the
losses due to entrainment leakages, inversion etc. An improved design also helps
better extraction and recovery of sugar.
6) Inventory and Material control Machinery of improved design, good layout planned and preventive
maintenance all help in reducing Inventory for spares. Selection of suitable process
also helps in reducing the cost of spares and replacement by establishing the levels of
inventory and usage levels all use of materials against the budgeted standards, it will
be possible to bring down inventory holding cost as well as waste of material in the
product cost.
7) Lobour Control Specialised Selection and training contribute to improve areas of control, in
that right worker at the rights spot will save in cost while misplaced worker may lead
to costly errors, waste of time and often comes in the way of others.
In this regard, the National sugar Institute has been doing good service to the
industry, providing properly trained personnel.
In the area of labour control, the supervisors must see that available labour are
made best use of and the data furnished for requirement and utilisation are factual and
accurate.
8) Maintenance cost control One of the control aspects which has got a great relevance in sugar factory is
the control of maintenance which is very substantial. It is necessary to establish tight
budget and work within the limits of the budget sanction. The complete requirement
budget should be prepared will in advance to ensure that only essential maintenance
expenditure is incurred.
9) Expenditure Control It is necessary to establish detailed expenditure budget for each item of
expenditure and this is to be scrutinised with relevance to the season in terms of the
length of the season in terms of the length of the season and capacity utilization etc.
and every item of expenditure actually incurred must be compared to the budgeted
values. For this purposes the expenditure so incurred should be analysed into variable
and fixed overhead expenses.
119

10) Manufacture of raw sugar for export and refining Raw sugar has wider export market. It is easy to manufacture and handle in
bulk. In cane sugar factories they produce raw sugar only, 75 percent of which is
exported and 25 per cent is refined in their own centralized refineries for internal
consumption.
Plant for producing raw sugar is much simpler and less costly than the direct
plantation white sugar plants. Existing plant can be used for production of raw sugar
also. While some of the equipments will be surplus and the plant's capacity will be
increased by about 25 % and the steam consumption will be reduced by about 10 per
cent.
White sugar is produced better in modern plants. The old plants, Where it is
difficult to produce good quality sugar, can be selected for producing raw sugar.
Sugar factories can be divided in to different groups according to the plant
condition location and availability of cane.
a) Modern factories, having facilities, can produce superior quality. White sugar for
special uses and 'Janata' as well for common people.
b) A group of nearby factories can produce raw sugar which will be refined in a
centrally located clarifying unit. Refining cast of raw sugar at the central
clarifying unit, is about Rs. 9 /- per quintal of sugar.
c) Factories which are scattered and away from the central refinery or from the port,
can produce only "Janata" sugar equal to present E- 29 by following DMC
process.
d) Factories situated near the ports can produce only raw sugar for export purposes.
11) Instrumentation Proper instrumentation helps efficient running and control of Boiler, Turbo alternators and automatic units. Besides for better process control with improved
efficiency and through put the common instruments like indicator and recorder for
temperature, pressure/ vacuum and PH, meters and recorder for boiler feed water,
imbibitions water for filter and movement water in pans, conductivity meter for pans
and steam flow meters and recorders are essential.
12) Co-Ordinated Research A lot of research work is being carried out in the Institutes, Universities and
Research Centers. Some study and development work are done in individual factories
also mainly to solve their own problems. But what is needed is a coordinated research
120

so that the research becomes result oriented to produce more at reduced cost. Efforts
are already afoot in this direction.
Reduced Cost of production by the method suggested above, will meet the
official commitment in lowering the prices of essential commodities and will also
help to promote export market and at the same time safe guard the interest of the
industry.
13) Selection of Machinery and Equipment a) Design Considerations The maintenance function starts with the design of the equipment If the
designer has access to previous experience related with maintenance of similar
equipments and if he has practical experience as regards the maintenance of
equipment such as he is in the process of designing he can do a lot to reduce the
amount of maintenance of equipment such as he is in the process of designing, he can
do a lot to reduce the amount of maintenance required and to facilitate the execution
of such maintenance as has to be carried out. The designer can choose such materials
and dimension the various components in such a way as to ensure that the equipment
will with stand all anticipated stresses and strains. It can also be ensured by him that
the equipment can be easily dismantled during repair or replacement.
The designer should always aim that cheaper components give way or wear
first before the defect can damage the more expensive part. A near analogy is that of a
fuse in an electrical system.
14) Economic Considerations 1) When purchasing equipment, it is important to take into account its maintenance
characteristic. Cheap equipment necessitating considerable maintenance can in
due course prove more costly than expensive equipment requiring little
maintenance. The purchasing cost constitutes, after all only a part of cost involved
throughout. Life of equipment i.e. the purchase price plus maintenance costs
during the entire service life of the equipment. Moreover the equipment costing
less and having too many breakdowns will in minimize the productivity causing
great loss to the factory.4

121

The characteristics in Fig. No. 4.4 show the development of costs from
purchase to disposal.

Maintenance Costs

Disposal Disposal

1) Low - quality equipment

Ti

Installation

2) High - quality equipment

Fig No. 4.4 : Maintenance Cost characteristic.
Equipment which is easily maintained may be comparatively expensive to buy
but once the teething problems are overcome, the maintenance cost will be low for a
long period of time, Besides, the useful life of equipment depends to some extent on
the case with which it can be maintained. If maintenance is difficult, running in
problems tend to be more serious and the maintenance costs throughout the life of the
equipment are higher than that with a better design.
The investment on purchase and maintenance should be decided considering :
a) Down time costs comprising - Loss of profit for the period that the machine
remains idle for maintenance work.
b) Wages paid to the labour while the machines remain idle.
c) Depreciation of the machine for the same period of time.
d) Overheads proportion for the period of machines idleness.
2) Cost of maintenance labour and overhead of maintenance department.
3) Cost of stores and spares used for the repairs and maintenance work.
4) Capital investment for replacement of machines/ components.
3) Layout Construction of Foundation and erection of machinery and
equipmentFetch equipment or a group of equipments should be installed in a manner
which provides adequate space for future expansion. Each machine should be easily
accessible for inspection and repairs works. The good layout facilitates staff in the
factory for better maintenance and monitoring of the condition of the equipment.
122

Adequate arrangement of light and ventilation is necessary. The factory should be

kept neat and clean and healthy environment should be created.
The machinery foundation should be economically designed and correctly
constructed. The foundations of machines subject to heavy vibrations should be taken
special care of.
Erection should be accurate, smallest mistake committed at the time of
erection may be a source of constant trouble. The proper alignment and leveling of
moving equipment is absolutely necessary. Proper grouting of holding down bolts,
proper installation of lubricating system and cooling arrangements and faultless
assembly of the equipment are equally important. The faulty erection and assembly
increases wear and tear and the down time.
4) Equipment Cards Equipment cards giving informations with regard to specifications, make
suppliers name and address and cost of the equipment should be should be
maintained. Help o these information's should be taken for reference purposes and for
procuring genuine spares.
5) A descriptive record of repairs and replacement A descriptive record of repairs and replacement on equipment / components
should be maintained. This will also contain the nature and reason of failures of the
equipments during the operational periods. Such records will help in future planning
Moreover, this will enable to study the behavior of the machines which is so essential
for carrying out proper repairs and improving the reliability.
6) Work Order System Maintenance work order control is a method by means of which every type o
maintenance job is covered by a standard written form which shows that the work is
needed, is adequately described, is properly approved and is issued by a proper
authority. This enables to analyses estimate and schedule the work. This also offers a
follow up procedure to access the progress and completion of work
7) A report on Out standing Work There should be a system to prepare a report on out standing work every day.
This report should be given to a proper authority for follow up.
8) Record of Frequency of Breakdown Frequency of breakdowns report should be maintained for each machine
which materially influences production. A machine remains down either for
123

scheduled work or for unexpected breakdowns. This work is necessitated either

because of improper maintenance or design defect or poor operation. Therefore it
becomes necessary to determine the reason for a breakdown and take suitable action
in this regard.
9) Work implication in Maintenance Effort should always be made in this direction. With implication of the work,
the time and cost of repairs are reduced considerably.
10) Workers participation and motivation aspect A sense of participation by the workers is vital for the growth of the industry.
They should be given due importance in the planning and execution of the
maintenance work. Shop floor level and plant level committees may be formed in
which representatives of workers should also be associated.
4.9

Professional Managements in cooperativesThe essential feature of a cooperative organization is its character of

democratic management. Here the principle of 'one man one vote' is strictly followed,
irrespective of number of shares held by a member. The board of director is elected by
the members and in turn the chairman is elected. This is followed by the authority
following from the chairman to the general manager or the chief executive downward
to the ultimate employees.
Members - The general body


Board of Directors


Chairman


Managing Director


General Manager


Other Employees
Fig No. 4.5 : Execution of Management Decisions
The professional manager is expected to assume broader responsibilities for
the conduct of the enter prize as an economic and social institution. Professionalized
management would ensure higher level of productivity, bringing about a higher rate
of economic growth and higher standards of living for the masses.5
124

4.10

Calculations for the Daily Manufacturing Report - 6

1) Brix % Cane :
Tonnes Brix in cane

= X 100

Tonnes Cane

2) Pol % Cane :
Tonnes pol in cane
= X 100

Tonnes cane

3) Fibre % cane :
Tonnes Fibre

= X 100

Tonnes cane

4) Mixed Juice % cane :

Tonnes Mixed Juice

= X 100

Tonnes cane

5) Mill Extraction (e) :

Tonnes Pol in mixed juice
= X 100

Tonnes Pol in cane

6) Recovery percent cane :

Tonnes Sugar

= X 100

Tonnes cane

7) Molasses percent cane :

Tonnes Molasses

= X 100

Tonnes cane
8) Boiling House Recovery (ESG)
Sucrose (or Pol) in sugar Produced

100 ( J - M )

Sucrose (or Pol) in mixed juice

J ( 100 - M )

= X 100 X

9) Reduced Boiling House Recovery (ESG) Gunda Rao (R85) :

M

(17 - 20J)

R (85) = r + K X

(1 - M)

17 J

10) Conversion of raw sugar into recovery into equivalent white commercial sugar
recovery :
S(J-M)
ESG

= P X

K(S-M)

Where ESG = Equivalent standard Granulated

P = Pol % sugar
125

S = 100
M = Purity of final molasses
Pol % Sugar
J = Purity of Sugar = X 100
100 - Moisture % Sugar
ESG Raw Sugar X Recovery Raw Sugar
Recovery White Sugar =
ESG White Sugar
Source - Books from "System of Technical Control for cane sugar factories in India." by N. C. Varma.

126

References :
1) J. MAURICE PATURAU, "By - products of the cane sugar industry", P.P. 6,
ELSEVIER PUBLISHING COMPANY Amsterdam. (Netherland) copy right
1969
2) "Golden Jubilee souvenir- 1960-2010", by National Federation of cooperative sugar factories Ltd. (P.P. 92)
3) Deccan sugar Technologist Association (India) 18th convention 1978 (P.P. 13,
14)
4) V. Singh, "Scientic and effective sugar plant maintenance management", The
sugar technologists Association of India" in 1986, (P.P. 98, 99)
5) Umesh

C.

Patnaik,

"INTRODUCTION

TO

CO

OPERATIVE

MANAGEMENT", (P.P. 19), Published by "KALYNI PUBLISHERS"

LUDHIANA, NEW DELHI, First Edition - 1987, Reprinted - 1996
6) Varma N. C., "System of Technical control for cane sugar factories in India", ,
Published by - "The sugar Technologist Association of India - Kanpur" in
1988.

Others
1) "Co - Operative Sugar Feb 1986
2) "Sharkara" April - June 2007 Edition, National Sugar Institute, Kanpur (India)
3) "Financial performance" of Co - Operative Sugar factories in maharashra,
Financial year 2006 - 07 and 2008 - 09
4) Report of the High powered committee on Sugar Industry (Mahajan
Committee) 1998

127