MANAGEMENT DISCUSSION AND ANALYSIS Industry overview The sugar industry has been India's rural economy driver because of numerous key interventions: • By encouraging the growth of cane over the years By providing extensive farm and non-farm employment across an estimated 50 million farmers and their families and by providing direct employment to over 0.5 million skilled and semi-skilled labourers in sugar mills and allied industries • By providing sales opportunities for a number of farm supplements and machinery • By creating logistic opportunities via the transportation of cane to factories and sugar to consumption points • By incentivizing the creation of a supporting infrastructure that enhances regional productivity • By providing timely payments for delivered cane (among stronger mills), virtually eliminating cane arrears. The Indian sugar industry (annual production capacity of around 30 million metric tonnes) is the second largest sugar producer in the world and the second largest Indian agro-based industry after cotton. The industry's annual turnover is estimated at over Rs.80,000 Crore; it contributes about Rs.2,500 Crore per annum to the exchequer through taxes. Over the last decade, the industry has emerged as a potent driver of environmental responsibility through the manufacture of ethanol and cogeneration. The result is that the country's sugar industry plays a critical role in addressing consumer brferences, economic growth and environmental responsibility. Sugarcane - area under cultivation, production and yield India's sugarcane production and area under cultivation registered a compounded annual growth rate of 3.70% and 2.03%, respectively, during the 10 years ending with sugar season 2013-14. Although sugar can be extracted from any crop possessing related content, sugarcane is brferred on account of its crop durability, governmental support and attractive viability over paddy and cotton. The result is that cane acreage under cultivation has increased consistently over the years. Localisation The Indian sugar industry is centred around sugarcane, a heavy, low-value, weight-losing and perishable raw material. Sugarcane cannot be stored for long on account of rapid sucrose loss. Besides, it cannot be transported in bulk on account of logistical costs and sucrose depletion. Even today, a majority of sugarcane is transported to factories through bullock carts within 20-25 kilometres of farms. Industry size, structure and developments The Indian sugar industry accounted for more than 15% of the global sugar production during the five years ending with sugar season 2014-15. As on January 31, 2015, India had 703 active sugar mills (including two standalone refineries), which were with brdominantly rural. About 50% of the sugar mills were promoted by farmers through cooperative societies. Of these mills, 328 have distillery facilities and 210 possess cogeneration power plants. India produces around 300-350 million metric tonnes sugarcane, 24-26 million metric tonnes of white sugar and 6-8 million metric tonnes jaggery and khandsari a year to address a growing demand. Besides, the industry produces approximately 2,700 million litres of alcohol and 2,300 MW of power and allied products. The industry does not just consume all the power that it generates. It channelises about 1,000 MW to state electricity grids after addressing captive needs. The industry is gradually transforming from standalone cane-crushing facilities into sugar complexes (sugar, bioelectricity, ethanol, bio-manure and chemicals) contributing about 1% to the national GDP Maharashtra, Uttar Pradesh and Karnataka are the principal sugar producing Indian states. Maharashtra and Uttar Pradesh cumulatively account for nearly 60% of the country's sugar production. Uttar Pradesh was the largest sugarcane cultivating state, accounting for 39% of the total sugarcane in 2013-14 followed by Maharashtra (22%). The average sugarcane yield during the last five years in Uttar Pradesh was 53-57 tonnes per hectare while Maharashtra reported an average yield of 77-93 tonnes per hectare. The Indian sugar industry is among the few industries to have catalysed the country's rural economy by generating employment. Uttar Pradesh sugarcane industry The cost of growing cane in Uttar Pradesh is attractively low and the soil and climatic conditions in some parts of the state considered ideal for sugarcane cultivation. To enhance cane growth, the State Government is likely to commission a research and development unit to develop superior plants offering enhanced yields and disease-resistance, strengthening its position within India's sugar sector. • Uttar Pradesh is agro-climatically suitable for quality sugarcane growth, marked by the use of lower inputs compared to other states. • The state possesses the leading sugarcane acreage in the country. The state accounted for about 40% of the country's sugarcane. • The state's output for 2015-16 is expected at 6.8 million tonnes. • The cane price (SAP) of C280 per quintal has remained unchanged for three years. • The acreage under early sugarcane variety in the state is expected to go up to around 40% of all cane areas in 2016-17, enhancing recovery, strengthening the balance sheets of sugar manufacturers and enhancing income for farmers. The global sugar industry, an overview Sugar production in the year 2015-16 is expected to fall globally by 4%, decreasing to 178.9 million tonnes raw value (mtrv) from 187.9 mtrv. This would be the most significant decrease in sugar production since 2008-09. This fall has been driven by heavy rainfall in Center-South Brazil, as well as in the EU, where the acreage has significantly declined year-on-year. Due to the fall in output in Brazil, the global deficit is estimated to steepen. Global sugar consumption • There was an increase in sugar consumption of 2.4% from 2014 to 2015, bringing the total volume to 182.9 mtrv. • The average consumption growth over the last decade has been about 2%; new point prices in 2015 led to a strong consumption growth. • The forecasted sugar consumption for 2016 is 186.1 mtrv. • These figures reveal an increase in global per capita consumption. Global balance • For the first time in five years, 2015-16 is likely to end in global deficit. • Although there are plentiful stocks due to four years of surplus, current prices reflect the recent shortfall in production. Opportunities in byproduct segments The manufacture of ethanol and cogeneration has emerged as enduring annuity earners for India's sugar industry. The global energy insecurity and environmental concerns are driving the adoption of the mixing of ethanol in fuel. Countries like Brazil, the U.S., Australia, Canada Japan and a number of European nations have mandated blending of ethanol with automotive fuel. Based on this reality, global ethanol demand is likely to grow exponentially; global ethanol exports, currently estimated at 6.5 billion litres, is expected to increase to 50 to 200 billion litres by 2020 (depending on crude oil prices and regulatory norms). India needs to develop fuel ethanol programmes with high blending levels. In 2017, based on molasses availability, the 5% level seems achievable. 10% / 20%, on the other hand, would need a stable blending policy and consensus between oil companies, automotive majors and the sugar industry. From a distillery perspective in 2017, an additional 96 million litres would be needed for the 5% blending ratio and projected demand increase for industrial and potable alcohol, while 965 million litres would be required in the event of 10% blending ratio . The regulatory environment will need to facilitate the transition to a higher blending programme through necessary changes. Higher blending levels will also warrant sugar mills - to shift flexibly from sugar to ethanol in response to market dynamics. In the cogeneration segment, the exportable power potential is estimated at approximately 9,700 MW for 2017. This can potentially address almost 6% of the additional power requirement of 128 gigawatts by 2017. Ethanol-blended petrol programme (EBP) The EBP, besides moderating pollution, is expected to ensure molasses utilisation and enhance revenue potential for sugar mills. The EBP was taken up for 2007. In 2012, the Cabinet Committee on Economic Affairs evaluated the recommendations of the Group of Ministers on the reports of the Expert Committee on pricing of ethanol and the Economic Advisory Council to the Prime Minister, and approved that the procurement price of ethanol would be decided henceforth by oil marketing companies and ethanol suppliers. Following this decision, the 5% ethanol blending with petrol became mandatory. Subsequently, for the last two years the Central Government has been following the fixed supply price mechanism for supply of ethanol by sugar mills to oil marketing companies. Key sectored constraints Production surplus, weakening realisations Key sectoral constraints Production surplus, weakening realisations: The Indian sugar industry has been reporting surplus sugar production since the 2010-11 Sugar Season. Concurrently, global sugar production exceeded immediate consumption, affecting realisations and closing down small and medium-sized mills. Regulated resource; vulnerable end product: The Indian sugar industry continues to be regulated by State and Central Governments - in terms of cane procurement areas and sugarcane pricing. FRP is decided by the Central Government for sugar season each year, which is the minimum cane price that a sugar mill needs to pay farmers. Besides, some State Governments also implement a (Administered Price) insisting that mills pay the FRP or the SAP (whichever higher). The FRP/SAP declared by the Indian Government for sugarcane is considered globally prohibitive. Brazil, the largest sugar producing nation, has linked sugarcane prices with market-driven sugar realisations. In India, the Rangarajan Committee was constituted to determine sugarcane price as a percentage of the price of sugar and byproduct realisations; their recommendations have not been implemented, making Indian sugar globally uncompetitive. The sugar inventory, with virtually no export (because of relatively low international prices), resulted in domestic price erosion. On the other hand, a consistent cane price increase impacted mill margins and affected the timeliness of cane payments to farmers. As on March 31, 2015, the difference between payments to farmers to be made as per FRP/SAP against sugarcane procured and actual payment made by the sugar manufacturers was estimated at about Rs.19,000 Crore. The situation aggravated when Uttar Pradesh kept the SAP prices at uneconomical levels unchanged during the last three sugar seasons. The State alone accounted for approximately 50% of cane arrears. Protected cane pricing; banks averse to sectoral lending: Operational snags, mounting cane arrears and a significant sugar stock debrssed prices, moderated operating sbrad and resulted in operating losses for a number of sugar mills. The Hon'ble Subrme Court's directive to sugar mills to prioritise farmer payments by liquidating the sugar stock hypothecated to banks over bank repayments created uncertainties in accessing additional financing from banks. Sugar mill financial performance: High domestic sugarcane prices in the last three years, uncompetitive export pricing, working capital tied up in sugar stocks and mounting cane arrears affected the financial profile of sugar companies in FY15. Following a decline in operating income and profitability, the operations of small and medium-scale sugar mills remained stressed. Government initiatives to address industry issues Export encouragement: The Central Government announced a MIEQ (Minimum Indicative Export Quota) in September 2015 for the export of sugar during the ongoing sugar season, to reduce surplus stocks. Ethanol blended petrol (EBP) programme: The Government of India mandated a minimum ethanol blending of 5% with petrol from June 2013 and set an aggressive target for increasing the blending ratio to 20% by 2017 in line with major sugar producing countries. The Indian Government incentivized the sugar industry by increasing ethanol prices to Rs.49.50 per litre for supply to oil marketing companies and waived the excise duty of 12.50% on ethanol intended for blending for 2015-16. Sugar Development Fund: The Sugar Development Fund (SDF) was set up under the SDF Act, 1982 for financing the sugar industry. Under this, the sugar mills are required to pay for the levy of cess (Rs.24 per quintal of sugar manufactured which has been increased to C124 per quintal w.e.f. 1st February 2016). The Indian Government uses SDF proceeds to advance loans for the rehabilitation and modernisation of sugar factories. The fund can also be used to build and maintain buffer stocks. Outlook Sugar production during sugar season 2015-16 is expected to be 25.2 million tonnes and lower in sugar season 2016-17. On the consumption side, robust demand is expected from soft drink manufacturers, confectioneries, hotels, bakeries and ice cream manufacturers. Besides, sugar consumption is likely to be catalysed by India's relatively strong economic growth, rising incomes, youthful population and changing consumption patterns. Balrampur Chini Mills Limited possesses the second-largest sugar manufacturing capacity in India; its cumulative manufacturing capacity of 76,500 TCD is sbrad across ten units. The Company's manufacturing units are located in Eastern and Central Uttar Pradesh, which usually enjoy robust cane output and recoveries. The units are proximate (within a radius of 150-200 kms) resulting in cost optimisation and operational synergies. The Company's raw materials are sourced from within 50-60 kms of its factories. The Company provides logistical support to shrink the time between post-harvest and crushing leading to attractive recoveries. The Company's growing cane needs are serviced by around 4.6 Lac farmers. Compétitive advantages Scale: The Company is among the largest sugar manufacturers in Uttar Pradesh, leveraging superior economies-of-scale. Geography: The Company's manufacturing units are located in Eastern and Central Uttar Pradesh, which offer better cane quality. Cane management: The Company provides better seeds and quality agri-inputs to its farmers in its command area reflecting in better cane quality and one of the best recoveries (in excess of 11%) in Uttar Pradesh for the current sugar season. Energy reduction: Process efficiency -enhancing measures helped the Company optimise energy consumption. Quality: Efficient operations and stringent quality checks enabled the Company to produce better quality sugar (more than 12% of the production as refined sugar), commanding better realisations. Farmer-friendly: The Company provides farmers quality seeds, effective agri-inputs, timely payment as well as logistical support for bringing the cane from fields to the factory. This helps the Company generate strong farmer support in its command area. Initiatives, 2015-16 • Better varieties of cane helped the Company achieve improved recoveries. • Improved processes and high output cane helped BCML enhance recovery by 131 bps during the sugar season 2015-16 • The Company prioritised energy optimisation through lower steam consumption, power consumption and water cycle reduction leading to lower bagasse consumption. This was utilised for the generation of more power. • The Company focused on improving process efficiency and consistency. • The Company reported superior plant maintenance, resulting in greater plant availability during the year. Outlook Going ahead, the Company will focus on optimising energy consumption on the one hand and improving cane varieties to increase overall recovery rates on the other. Balrampur has already invested in 320 KLPD distillery capacity to produce industrial alcohol and ethanol. The Company is among the few in India to invest in a distillery capacity capable of consuming its entire molasses output captively, reducing its dependence on external sources. The Company converts a majority of the rectified spirit produced in the distillery into ethanol, enabling the Company to service OMC contracts. These large volume contracts are backed by strong realisations and quicker off-take, helping the Company enhance revenue visibility, improve bottomline and register stronger performance. Competitive advantage Scale: The Company over the years created a capacity of 320 KLPD, which helps the Company enjoy economies-of-scale on the one hand and utilise its molasses output captively on the other. Environment-friendly: The Company is among the first in Uttar Pradesh to invest in incinerators which would help the Company achieve zero liquid discharge status for its distillery operations and help extend distillery operation by 60 days a year. Ethanol focused: Owing to assured offtake by the OMCs at a br-determined price, the Company has already dedicated 87% of its capacity towards ethanol production which going forward, it plans to increase to 100%. Initiatives, 2015-16 • The Company was permitted to operate its distillery for only 270 days a year on account of the sugar-based distillery being flagged as 'red' on account of its environmental impact. The Company installed an incinerator at its distillery which would help increase distillery availability to 330 days, enhanced captive molasses consumption, achieve 'zero' discharge and utilise incinerated wastes for energy generation. • Around 87% of the distillery capacity was dedicated to ethanol production. Outlook The Company is implementing incinerators across distilleries, strengthening its environment-friendliness. The Company will focus on enhancing distillery availability and divisional revenues. Balrampur invested in 153.2 MW worth of saleable power generation capacity across eight units. Nearly 71% of the cogenerated energy was sold to the State Electricity board secured through multi-year power purchase agreements. While profitability in the sugar segment is highly dependent on market cycles, sale of power adds significantly to the bottomline and provides assured power for captive use. Over the past five years, the Company was able to achieve higher PLF, which led to improved revenue contribution (net of inter-segment) from 6.45% in 2012-13 to 10.07% in 2015-16. The Company consumed almost the entire bagasse generated for co-generation, a decisive value-addition measure. Competitive advantage Scale: The Company has created a saleable cogeneration capacity of 153.2 MW which after sufficing captive needs, gets exported to the extent of nearly 71% to the State Electricity Grid for additional revenue generation. Effkiency: Process efficiency improvement and brventive maintenance initiatives helped the Company achieve higher PLF. Initiatives, 2015-16 • The reduction in power and steam consumption helped release additional bagasse for power generation, bringing in additional revenues. • Enhanced machine-time efficiency, increasing the yield ratio of steam from bagasse. • Channelised 5,307.41 Lac units of power to the grid at C4.77 per unit (6168.1 Lac units at Rs.4.23 per unit in 2014-15) Outlook Going ahead, the increased bagasse availability is expected to strengthen the cogeneration capacity utilisation of the Company. The Company will also work on improving plant availability Strengths • The Indian sugar industry is the second largest producer of sugar in the world after Brazil. The sector has the potential to make the country become self-reliant in a highly-sensitive, mass consumption market. • The Uttar Pradesh sugar industry paid Rs.9,597 Crore to the sugarcane growers for the sugar season 2015-16 in addition to clearing dues of sugar season 2014-15. • Annual tax contribution to exchequer stands at Rs.25 billion annually. • The Indian sugar industry provides direct employment, including ancillary activities, to about 0.5 million workers in sugar mills and allied industries. • The Indian sugar industry also supports downstream industries by providing necessary raw materials. • The Indian sugar industry has been the focal point of rural socioeconomic development. Challenges • Strong governmental policies regulating input prices resulting in uncompetitive costs of production at times. • Most of the sugar factories are more than 40 years old and dependant on legacy technologies with low installed production capacities leading to a decrease in production. Opportunities • High value of byproducts for downstream industries. • Huge potential to increase the productivity of cane and sugar recovery rates. • Availability of advanced technology available for effective byproduct utilisation. Threats • Sugar sector vulnerable to political interests. • Lack of ground water availability for irrigation. • Deteriorating quality of soil due to the overuse of fertilisers and pesticides for increasing sugarcane yield. • Increased competition. Capital structure The equity capital of the Company increased marginally to Rs.24.50 Crore as on 31st March 2016 (244949767 shares of Rs.1 each) from Rs.24.49 Crore as on 31st March 2015 (244916267 shares of Rs.1 each). The increase in equity capital was a result of shares issued under the Employee Stock Option Scheme. Reserves and surpluses Reserves and surpluses of the Company increased by 9.15% from Rs.1104.96 Crore as on 31st March 2015 to Rs.1206.11 Crore as on 31st March 2016. This was mainly on account of ploughing back of profit for the year amounting to Rs.99.42 Crore. During the year, Capital Reserve increased by 12.97% to Rs.13.06 Crore owing to the receipt of capital subsidy of Rs.1.50 Crore. Capital Redemption Reserve, Revaluation Reserve and General Reserve remained unchanged during the year. Free reserves for the Company stood at Rs.1191.20 Crore as on 31st March 2016, accounting for 98.76% of the total reserve. Debt profile Total long-term borrowings (including current maturities) of the Company increased by 37.63% from Rs.491.69 Crore as on 31st March 2015 to Rs.676.70 Crore as on 31st March 2016 due to the availment of soft loan as per Central Government scheme and also rupee loans for incinerator projects. Working capital borrowings stood at Rs.994.42 Crore as on 31st March 2016 against Rs.1182.83 Crore as on 31st March 2015. Capital employed The capital employed by the Company in the business stood at Rs.2901.72 Crore as on 31st March 2016 against Rs.2803.97 Crore as on 31st March 2015, an increase of 3.49%. ROCE for the year stood at 16.26% in 201516 against 5.10% in 2014-15. Gross block and debrciation Gross block of the Company stood at C2831.67 Crore as on 31st March 2016 compared to Rs.2683.87 Crore as on 31st March 2015. The Company provided Rs.110.11 Crore as debrciation and amortisation during the year. Accumulated debrciation, as a percentage of gross block, stood at 49.67% as at 31st March 2016. Non-current investments Non-current investments stood at Rs.40.85 Crore as on 31st March 2016 compared to Rs.40.87 Crore as on 31st March 2015. Long-term loans and advances Long-term loans and advances increased by 2.25% from Rs.89.06 Crore as on 31st March 2015 to Rs.91.06 Crore as on 31st March 2016, largely owing to an increase in capital advances for the incinerator projects. Other non-current assets Other non-current assets decreased from C171.52 Crore as on 31st March 2015 to C3.22 Crore as on 31st March 2016 owing to claim receivables amounting to C169 Crore written off during the year. Inventories Inventories as on 31st March 2016 stood at C1864.93 Crore as compared to C1669.25 Crore as on 31st March 2015, an increase of 11.72%. This was largely due to the valuation of sugar at a higher rate as compared to the last year. Trade receivables Trade receivables increased by 25.23% from C158.61 Crore as on 31st March 2015 to C198.63 Crore as on 31st March 2016 largely owing to an increase in receivables on account of power sale to UPPCL. Short-term loans and advances Short-term loans and advances increased 67.47% from Rs.30.53 Crore as on 31st March 2015 to Rs.51.13 Crore as on 31st March 2016 largely owing to an increase in CENVAT, VAT and other taxes and duties. Other current assets Other current assets decreased from Rs.277.76 Crore as on 31st March 2015 to Rs.61.51 Crore as on 31st March 2016, mainly owing to realisation of claims receivable on account of cane price subsidy for the sugar season 2014-15. Overview BCML has a strong support system for its farmers. The farmers are provided better quality seeds along with effective agro inputs to improve productivity. The Company also encouraged farmers to sow earlymaturing crops, which help achieve better recovery rates Uttar Pradesh brsence rationale Balrampur Chini has over the years chosen to stay in Uttar Pradesh. Uttar Pradesh offers one of the best climatic conditions for sugarcane production in the country. With an improvement in irrigation network, Uttar Pradesh has progressively reduced its dependence on the monsoons. BCML has a cumulative cane crushing capacity of 76,500 tonnes of cane per day. Out of its ten units, eight are located in the Eastern Uttar Pradesh and two in Central Uttar Pradesh – these two regions offer better quality sugarcane compared to rest of the state. The Company’s sugar capacities are integrated with an overall distillery capacity of 320 kilolitres per day and saleable cogeneration capacity of 153.2 MW. Locations Eastern Uttar Pradesh: 8 Central Uttar Pradesh: 2 Achievements BCML has the second-largest cane crushing capacity in Uttar Pradesh. The Company paid cane dues to the farmers within stipulated timelines. Outperformance BCML achieved its highest ever recovery of 11.13% during sugar season 2015-16. Outlook Going ahead, BCML’s primary objective will be to enhance process efficiencies through the optimisation of energy usage. Our environment management Overview At Balrampur Chini Mills, we have progressively invested in environment protecting plants and processes, strengthening the company’s position as a responsible corporate citizen. Operating philosophy The company’s operating philosophy is one of integration – whereby the end product of one business segment rebrsents the raw material for another segment. This integration enhances resource consumption, minimizes logistics costs and reduces the need to dispose material in the external environment. The core cane crushing operation generates molasses and bagasse as by-products; molasses is utilised to manufacture ethanol; bagasse is utilized to generate power. It would be relevant to indicate that even as this overarching process architecture is by itself environment-friendly, the nature of downstream products also contributes to environment integrity. For instance, ethanol is used as a petrol additive that enhances engine combustibility that reduces vehicular emissions; bagasse is used to generate power through a renewable resource (as opposed to finite fossil fuels). The beauty of this arrangement lies in the fact that all byproducts generated by the Company are consumed within; the company is not required to market by-products. Emissions control Overview: Prior to 2000, environment management within the country’s sugar industry was not a priority. At BCML, we took a differentiated perspective; we invested in environment management plants and processes well before most norms became mandatory and in, doing so, reported results that were considerably more compliant that required by statutory agencies. Investment: The Company strengthened its environment commitment through investments in electrostatic brcipitator in cogeneration plants. The ESP reduced solid particulate matter to less than 50 mg/nm3 as against brvailing norms of 150 mg. Beneits: The investment strengthened the company’s environment friendly credential. The company’s cogen capacity is 100 percent ESP-backed. In some of the older plants, the company invested in a wet scrubber with similar effectiveness. Result: Emissions across the company’s plants are well below brvailing pollution control limits. Overview Sugar cane process produce 50% water (500 litres / ton cane crush) on cane crush in the form of a vapour condensate of 70-80 degree centigrade out of which 32 % (320 litres / ton cane crush) evaporates through cooling towers while the remaining 18% (180 litres / ton cane crush) is captured within the system through recirculation. All our new plants are equipped with the latest effluent treatment equipment coupled with buffer storage reservoirs to avoid shock dosing of the ETP and with ponds for irrigation addressing pollution control norms. The older plants are being retrofitted with modern technologies to address CPCB norms. Investment The company invested in a buffer effluent water storage tank and post-treated water ponds in all new plants, addressing the CPCB norm of 200 litres per tonne of cane crush. The company also replaced the use of black bituminous mill roller bearing oil with solid grease to maintain oil-free water. The Company embarked on the use of fully-covered bagasse-handling conveyors in place of the commonly-used open bagasse conveyors to control air and water pollution. The company extended this investment across most plants. Beneits This regulated the flow to the effluent treatment plant, enhancing ETP efficiency, the first such in the country’s sugar industry. The use of solid grease minimized ground spills and enhanced ETP efficiency. The post-treated water is used in a pond within the brmises that supports aquatic life. Result: The Company’s achievements (pH, total suspended solids and biological oxygen demand) have emerged as national benchmarks Energy conservation Energy conservation is the need of the hour for long-term business sustainability. This can be achieved in the following manner: Reduction of steam consumption in old plants: The steam consumption of our three old units (Ballarpur, Babhnan and Tulsipur) is to be reduced to 38-40% from 54% of cane crush following the implementation of the latest technologies, potentially saving almost 7% of bagasse (160,000 tonnes) per annum and enhancing revenues by Rs.3500 Lacs per annum. The investment of Rs.7000 Lacs across two years can potentially generate a payback of two years. Bagasse drying The installation of a bagasse drier can save about 2-3% of bagaase of all group plants and save around 150,000 tons of bagasse annually. This can potentially enhance revenues by Rs.3000 Lacs annually with an estimated cost-benefit ratio of two seasons. The Company is in the process of installing the same in a phased manner Investment The Company plans to replace inefficient worm type reduction gear box with efficient planetary gears and helical gears across all plants. The company plans to invest a large amount in energy conservation and the installation of waste heat recovery system. The proposed investment in energy conservation and bagasse drying system will initially be inone plant followed by all plants in two or three years. Beneits This could translate into increased power efficiency across the company’s manufacturing facilities – enhanced power efficiency, lower steam consumption and lower power consumption per tonne of crushed cane. The bagasse drying system can potentially moderate moisture content from 45% to 35%, enhancing bagasse availability to power the incinerator; it canen hance waste heat flue gas recovery. Result: These initiatives translated into power substantial savings, strengthening competitiveness. The bagasse drying investment can potentially generate a payback of two or three years. Overview Molasses, the by-product of sugar manufacture, is processed in distilleries to produce power alcohol / ethanol. This demands huge quantities of raw water / bore-well water for fermentation, generating 8 litres of coloured spent wash per litre of alcohol production. This spent wash is being used in the production of organic manure by mixing with Filter Mud (by product). Incineration is the best solution for real zero discharge for a distillery. At BCML, we are proud to state to have made this forward-looking investment. Investment The company committed to invest Rs.225 Crores across three distillery units (320 KLPD) in 2015-16 to incinerate distillery waste. The concentrate spent wash generates condensate water, which is treated in a condensate polishing unit to enhance reusability and reduce ground water requirements. Beneits The incineration generates heat and power and potash-rich ash (soil nutrient). Ground water extraction has been minimized. Molasses, which was earlier sold because of an inadequate number of operating days, will now be completely consumed within to maximize ethanol output. Result: The distillery has now been permitted to run an additional 60 days i.e. up to 330 days, enhancing unit profitability and generating a three-year payback. Internal control system and their adequacy The internal controls are commensurate with the size and the nature of the nature of the operations of the Company. These controls have been designed to provide a reasonable assurance with regard to maintaining proper accounting controls, monitoring of operations, safeguarding of resources and utilizing them to the maximum, promoting operational efficiency, compliances with applicable regulations and ensuring reliability of financial reporting. In addition, there is an internal audit process that reviews the in-system checks and regularly covers significant operational areas. The Audit Reports, submitted by the Internal Auditors, are reviewed by the Audit committee. Any suggestion for improvements submitted to the Committee are considered and the implementation of corrective actions, wherever required, is followed up. Statutory and Internal Auditors are also invited to the Audit Committee meetings to ascertain their views on the adequacy of internal control systems. Periodically, the Board of Directors is informed of the same. Human resources The focal point of the Company’s human resource policy is continuous learning; the policy is progressively geared to meet the aspirations of the employees. To enhance efficiency and competence, as well as motivate employees, the Company organizes training programmes. This resulted in an effective retention of employees and enhanced loyalties. The Company provides various compensation packages and performance-based incentives. To attract and retain the best available talent, the Company is committed to providing equal employment opportunities and the best working conditions. The Company had 3113 employees on its payroll as on 31 March, 2016. Cautionary statement Statements made in this report describing industry outlook as well as the Company’s plans, policies and expectations may constitute ‘forward-looking statements’ within the meaning of applicable laws and regulations. Actual results may differ materially from those either exbrssed or implied. |