A STUDY ON

“INVENTORY MANAGEMENT”

A project report submitted to Andhara university , Vishakapatanam in partial fulfillment

of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

MANDHAPATI SHANMUKHA RAJU

Reg. 111234702011

Under the guidance of

Mr. SRINIBAS PANDA

MANAGER (P&A)

SANKILI
 CERTIFICATE
This is to certify that m/s. MANDHAPATI SHANMUKHA RAJU student of MBA in the
department of master of business administration at Vishaka Institute of Professional
Studies,Vishakapatnam. During the academic year 2011-2013 has undergone the project
work on a study on “INVENTORY MANAGEMENT” in PARRYS industries ltd., sugar
division,”sankili under my supervision and had fulfilled the requirement concerning the
project work.

Place:
Date:

Mr. SRINIBAS PANDA

MANAGER (P&A)
SANKILI.
 DECLARATION

I, hereby declare that this project title (“INVENTORY MANAGEMENT”) with reference
to.PARRYS SUGARS LTD,SANKILI submitted by me on partial fulfillment for the
requirement of the MASTER OF BUSINESS ADMINISTRATION degree Vishaka Institute
of Professional is my own work and its not submitted any other institutions or published
anywhere for the awards of any degree or diploma.

Place:
Date: (MANDHAPATI SHANMUKHA RAJU)

Reg no:111234702011
 ACKNOWLEDGEMENT

I sincerely acknowledge thanks to Smt.deepika Lecturer in (MBA) fir their co-operation and
through out my project work First and foremost would like to acknowledge the sincere
thanks to university for giving me this opportunity.

I owe gratitude to project guide Mr. M.Praveen Kumar (Fiancé Department) who has always
taken Keen interest in my academic pursuits and guided me.

I am thankful to Mr. Srinibas Panda Manager (P&A) encouraging support giving the course
of my project work in esteemed organization.

Last but not least, I would like to express my deep sense of gratitude to the respondents who
extended their immense help by providing the required information which in turn helped me
in achieving the objective of the study.
Place:
(MANDHAPATI SHANMUKHA RAJU)

Date: Reg No:111234702011

CHAPTER – I
INTRODUCTION
 INTRODUCTION

Finance is an integral part of modern economic life and occupies an important place in all
economic activities. Finance is “the science of money” and life blood of industrial system.
Financial management is that managerial activity, which is concerned with the planning and
controlling of the firm’s financial resources. Financial management in its infancy dealt with
financing of corporate enterprises. Its evolution may be dividends into two broad phases the
traditional phase and the modern phase. Its scope was treated in the narrow sense of procurement
of funds by corporate enterprises to meet their financing needs because of its central emphasis on
the procurement of funds.

The finance functions of rising and using money through has a significant effect on other
functions, yet it needs no necessarily limit or constraint the general running of the business. A
company in a right financial position, will of course, give more weight to financial considerations,
and devices its marketing and production strategies in the light of the financial constraint on the
other hand management of a company which has a regular supply of funds will be more flexible
in formulating its production and marketing policies. In fact, financial policies will be devised to
fit production and marketing decisions of a firm in practice.

The basic for financial planning and decisions making is financial information. Financial
information is needed to predict, compare and evaluate the firm’s earning ability; it is also required
to an enterprise to find out the actual performance.

Management should be particularly interested in knowing financial strength of the firm to

make their best use and to be able to spot out financial weakness of the firm to take suitable
corrective actions thus financial analysis is the starting point of making plans before using any
forecasting & planning procedure.

Financial analysis is the process of identifying the finance strength & weakness of the firm
by properly establishing relationship between the items of the balance sheet and profit and loss
account. The study on ration analysis of PARRYS focuses on identifying the strength and
weaknesses of financial position as well as its financial performance for the year 2005-2006 to
2009-2010. This study also analyzes the profitability and liquidity position of the company.
 Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives a skilled and experienced analyst, a better
understanding of the financial conditions and performance of the firm.

Ratios are relationships expressed in mathematical figures which are connected with each
other in some manner. The ratio analysis is one of the most powerful tools of financial analysis. It
is used as a device to analyze and interpret the financial health of enterprise.

The study on the ratio analysis in the organization help in assessing corporate excellence
judging credit worthiness and it also helps in determining the financial performance of the
company for this purpose data are collected for the period of 5 years, various ratios are used in the
study to find out the liquidity and profitability position of the organization.

SUGAR INDUSTRY IN INDIA

Sugar is one of the oldest commodities in the world and traces its origin in 4th century AD
in India and China. In those days sugar was manufactured only from sugarcane. But both countries
lost their initiatives to the European, American and Oceanic countries, as the eighteenth century
witnessed the development of new technology to manufacture sugar from sugar beet. However,
India is presently a dominant player in the global sugar industry along with Brazil in terms of
production. Given the growing sugar production and the structural changes witnessed in Indian
sugar industry, India is all set continue its domination at the global level.

Sugar industry is the largest agro based industry located in the rural India. About 45
million sugarcane farmers, their dependents and a large mass of agricultural laborer are involved
in sugarcane cultivation, harvesting and ancillary activities, constitution 7.5% of the rural
population. Besides, about 0.5 million skilled and semi-skilled workers, mostly from the rural areas
are engaged in the sugar industry. The sugar industry in India has been a focal point for socio-
economic development in the rural areas by mobilizing rural resources, generating employment &
higher income, transport and communication facilities.

There are 566 installed sugar mills in the country with a production capacity of 190 lakh
MTs of sugar. These mills are located in 18 States of the country. About 60% of these mills are in
the cooperative sector, 35% in the private sector and rest in the public sector.

On the back of successive good monsoons, sugar production in the country increased
rapidly in the last five years, reaching 20.1 million tons in 2002-03 from15.5 million tons in1998-
99. Huge increase in production up to 2002-03 has been followed by low sugar production in 2003-
04 (and projected low production in 2004-05) on account of drought and pest infestation in certain
major sugar producing States.

By April 2004 the sugar industry found itself entangled in a complex web of problems of
high stocks, low prices, poor profitability, mounting cane prices arrears, financial crunch (or
outright sickness), limited modernization/expansion/diversification, and weak competitive edge.
 The average capita consumption of sugar is estimated at 18.3 kg/year in the year 2002-03.
Based on the existing trend, this is estimated to increase to 23-24 kg by year 2010. India has
maintained its position as the 2nd largest sugar producing country in the works, having a share of
over 15 percent of the world’s sugar production.

The status of Indian sugar industry has been compared with the rest of the world in terms
of raw material availability, crushing period, size of the sugar mill, production cost and prices in
the report. The advantages that Indian sugar mills have over others in cost terms have been
emphasized too. Indian sugar industry is highly fragmented with organized and unorganized
players. The unorganized players mainly produce Gur and Khandari, the less refined forms of
sugar. The government had a controlling grip over the industry, which has slowly yet steadily
given way to liberalization. The report provides comprehensive analysis about the structure of
Indian sugar industry by explaining the above facets.

Besides the classification of sugar products and byproducts like molasses, their uses too
have been extensively covered. The production sugarcane is cyclical in nature. Hence the sugar
production is also cyclical as it depends on the sugarcane production in the country.

The report provides extensive information on the production of sugarcane, sugar and other
sweeteners in the country in the recent years along with trends and analysis. This also includes a
discussion about existing capacities in the country, trends in capacity additions, imports and
production of by-products of sugar (molasses and cogeneration of power).

The report features a detailed demand analysis discussing the actual demand for sugar and
other sweeteners, gur and khandari and their per capita consumption in India. This includes a trend
analysis in demand in various regions of the country. The role of exports in the sugar industry has
also been discussed. The report gives an exhaustive cost analysis along with the pricing practices.

Dual Pricing System is adopted in the Indian sugar industry, which includes sugar price in
Public distribution system and the free sale sugar price. An analysis has been provided on the
relationship between Indian and international sugar prices. As the industry is a fragmented one,
even leading players do not control more than 4 percent market in India. However, the situation is
changing and players off late are striving to increase their market share either by acquiring smaller
mills or by going for green field capacity additions.

Another notable trend is the shift from Gur and Khandsari to sugar in the rural areas. This
should further increase the per capita consumption of sugar in India (currently around 15.6 kg).
Besides the Indian urban market is slowly moving towards branded sugar.

The potential in this segment seems to be very high. These trends along with the other
trends like increase in the production of by-products have been captured in detail. The market
shares of the leading players and financials of following players are given in the report.

Balrampur chini mills ltd,

Bajaj Hindustan Ltd,
Andhra sugars ltd,
Thiru Arooran Sugars Ltd and
Dhampur sugar ltd

The major revenue drivers like change in the government’s policies and increasing per
capita consumption have been comprehensively pictured in the report. The reports ends with
outlook for the sugar industry both at the Indian and international level.

NEED FOR THE STUDY

❖ Management should be interested in knowing the financial strengths of the firm to make
their best use and to be able to spot out the financial weaknesses of firm to take suitable
corrective actions.
❖ Users of the financial statements can get better insight about the financial strength and
weakness of the firm if they properly analyze the information reported in the statements.

❖ The future plans of the firm should be laid down in the view of the firm’s financial strengths
and weaknesses.

❖ Thus, financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. Understanding the past a prerequisite
for anticipating the future. The natures of the analysis were differing depending on the
purpose of the analyst.

❖ Ratio analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used
as a benchmark for evaluating the financial position and performance of a firm.

❖ Ratios help to summarize large quantities of financial data and help to make qualitative
judgment about the firm’s financial position. It is used as a device to analyze and interpret
the financial health of enterprise.

❖ The study on ratio analysis in the organization helps in determining the financial
performance of the company for this purpose data are collected for the period of 5 years.
Various ratios are used in the study to find out the liquidity & profitability of the
organization.
 OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital
is managed effectively, monitored efficiently planed properly and reviewed periodically at regular
intervals to remove bottlenecks if any the company can not earn profits and increase its turnover.
With this primary objective of the study, the following further objectives are framed for a depth
analysis.

The project was designed keeping in view the following objectives

❖ To studies the working capital management of PARRYS industries Ltd.

❖ To evaluate the financial performance of PARRYS industries Ltd by computing

various ratio's.

❖ To study the optimum level of current assets and current liabilities of the company.

❖ To analyze the profitability and liquidity position of PARRYS industries Ltd.

❖ To identify the strengths and weaknesses of the organization by properly

establishing relationship between items of the balance sheet and profit and loss
account.

❖ To offer suggestions to management for the improvement of organizations financial

performance.
 METHODOLOGY

INTRODUCTION

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic behind
them.

It is important for research to know not only the research method but also know methodology. The
procedures by which researchers go about their work of describing, explaining and predicting
phenomenon are called methodology. Methods comprise the procedures used for generating,
collecting and evaluating data. All this means that it is necessary for the researcher to design his
methodology for his problem as the same may differ from problem to problem.

Data collection is important step in any project and success of any project will be largely depend
upon now much accurate you will be able to collect and how much time, money and effort will be
required to collect that necessary data, this is also important step.

Data collection plays an important role in research work. Without proper data available for analysis
you cannot do the research work accurately.

Types of data collection:

There are two types of data collection methods available

1) Primary data

The primary data is that data which is collected fresh or first hand, and for first time which is
original in nature. Primary data can collect through personal interview, questionnaire etc. to
support the secondary data.

2) Secondary data collection method

The secondary data are those which have already collected and stored. Secondary data easily get
those secondary data from records, journals, annual reports of the company etc. It will save the
time, money and efforts to collect the data. Secondary data also made available through trade
magazines, balance sheets, books etc.

This project is based on secondary information collected through five years annual report of the
company, supported by various books and internet sides. The data collection was aimed at study
of working capital management of the company.

Project is based on

1. Annual report of PARRY’S LTD 2007-08

2. Annual report of PARRY’S LTD 2008-09
3. Annual report of PARRY’S LTD 2009-10
4. Annual report of PARRY’S LTD 2010-11
5. Annual report of PARRY’S LTD 2011-12

SCOPE AND LIMITATION OF THE STUDY

The scope of the study is identified after and during the study is conducted. The study of working
capital is based on tool like Ratio Analysis Further the study is based on last 5 years Annual
Reports of PARRYS Industries Ltd. And even factors like competitor s analysis, industry analysis
were not considered while preparing this project.
Limitations of the study
Following limitations were encountered while preparing this project:

1) Limited data:-

This project has completed with annual reports; it just constitutes one part of data collection i.e.
secondary. There were limitations for primary data collection because of confidentiality.

2) Limited period:-

This project is based on five year annual reports. Conclusions and recommendations are based on
such limited data. The trend of last five year may or may not reflect the real working capital
position of the company

3) Limited area:-

Also it was difficult to collect the data regarding the competitors and their financial information.
Industry figures were also difficult to get.

● The scope of the study of the financial analysis is limited to the areas of ratios analysis.
● Another limitation of the study is data collected has some hurdles due to large size of the
organization.
● The limitation of the financial tools applies for the study.

FRAME WORK OF THE STUDY

1) Chapter One deals with Introduction, Need, Objectives, Methodology and Limitations of
the study and frame work.

2) Chapter Two deals with the profile of Sugar Industries in India.

3) Chapter Three deals with organizational profile PARRY’S Industries Ltd, Sugar Division,
Sankili.

4) Chapter Four deals with theoretical aspects of Working Capital Management - Meaning,
Nature, Objectives and Importance. And also Ratio Analysis - Meaning and types of ratio
analysis, objectives, Essentials of ratio analysis.

5) Chapter Five deals with Analysis and interpretation of the Financial Data. Different years
of the company’s consolidated abstract Income & Expenditure accounts, revised estimates
for Five years.

6) Chapter Six comprises of summary and suggestions. In this chapter some of the
improvements and suggestions are given on the study of ratio analysis of the company.
 CHAPTER - II
INDUSTRY PROFILE
 WORLD SUGAR PRODUCTION

Country wise sugar production:

Rank Country Production (1000 MT)

1 Brazil 39,400.00
2 India 25,700.00
3 EU-27 14,800.00
4 China 12,670.00
5 United States 7,607.00
6 Thailand 6,870.00
7 Mexico 5,450.00
8 Australia 4,800.00
9 Pakistan 3,270.00
10 Russian Federation 2,850.00
11 Guatemala 2,474.00
12 Turkey 2,400.00
13 Argentina 2,290.00
14 Colombia 2,200.00
15 South Africa 2,140.00

SUGAR INDUSTRIES IN INDIA

 Sugar Industry in India is well developed with a consumer base of more than billions of
people. It is also the second largest producer of sugar in the world.

There is around 45 millions of sugar cane growers in India and a larger portion of rural
laborers in the country largely rely upon this industry. Sugar Industry is one of the agricultural
based industries. In India it is the second largest agricultural industry after china.

Statistics on Sugar Production

 As to the statistics there were a total number of 566 Sugar Factories in India as on March
31, 2005 compared to 138 during 1950-51. These 566 sugar mills produce a total quantity of 19.2
million tons (MT). Sugar production in India increased from 15.5 MT in 1998-99 to 20.1 MT in
2002-03. Now the total number of sugar factories in India is 553 as on march 31, 2010.

Department of Agriculture and Co-operation, sugarcane production in 2004-05 is estimated

at 232.3 MT from 237.3 MT in 2003-04. Sugarcane production is expected to reach 257.7 MT in
2005-06.

Production (1961-2007), Source: ISMA

INDIAN SUGAR INDUSTRY- ANALYSIS

Indian sugar industry has entered the strongest up cycle (lowest stock to use ratio) in the
history of 50 years after witnessing supply glut in previous two sugar seasons in a row (SS 2006-
08). In SS2006-07, sugar production reached all-time high of 28.3 mn tonnes, registering a growth
of 46.6% on year by year basis and it declined marginally by 7.1% to 26.3 mn tonnes in SS2007-
08. Sugar production reached an all-time low of 14.7 mn tonnes during SS2008-09 due to sharp
fall in the sugarcane acreage. However, sugar consumption continued to grow at a steady pace.

In SS2008-09, on account of a steep fall in sugar production and fall in the stock to use
ratio, the average wholesale prices increased by almost 50% on year by year basis. This had a
positive impact on the margins of sugar companies in quarterly for the year 09.

The production of sugar is spread across the country. Maharashtra, Uttar Pradesh,
Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh are the major sugar producing states in the
country. In SS2007-08, these six states together accounted for almost 92% of the total sugar
produced in India. In SS2007-08, the State of Maharashtra produced the highest sugar at 9.1 mn
tonnes followed by UP with 7.3 mn tonnes. These two states together account for almost 62% of
the total sugar produced in India.

Sugarcane is the primary raw material for the sugar industry. It accounts for almost 75%-
80% the total operating cost of the sugar industry. UP is the largest sugarcane-producing state in
the country and accounted for about 37% of the total sugarcane output in SS 2007-08 followed by
Maharashtra with 24%. Even though, UP is the largest sugarcane-producing state in the country it
is the second-largest sugar producer in India as drawl and recovery rates in UP are one of the
lowest in India.

We expect sugar deficit situation in India to continue in SS2009-10 and SS2010-11. We

believe that India will bridge the gap between demand and supply through imports. We expect that
sugar prices will continue to rise till SS2009-10 on account of tight demand and supply situation
in country.

1. Indian Sugar Industry – Concept & Terminologies in India, it is classified under essential
commodities which makes it vulnerable to regulatory policies by the regime. The quantum of
sugar produced by a mill is determined by the factors like daily crushing capacity, duration of
crushing season and percentage of sugar recovery.

[Tones Crushed per Day (TCD), 180 days and 10-12%] The Sugar Year (SY) is from
October to September At present, sugar mills are required to provide 10 per cent of their total
production as levy sugar (Rs 13 / kg) for the Public Distribution System (PDS) Sugar is a cyclic
industry which follows a three year cycle. SMP is the Govt. determined price at which sugar
manufacturers purchase cane from farmers whereas SAP is the price at which sugar manufacturers
sell sugar in the free market.

2. Indian Sugar Industry – An Overview India is the second largest producer of sugar cane
after Brazil. On the domestic front, the Indian sugar industry has a turnover of Rs. 700 billion
per annum (US $ 14.6 billion). There are 553 installed sugar mills in the country with a
production capacity of 180 lakh MT of sugar.

These mills are located in 18 states of the country, with Maharashtra contributing over one-
third of it. About 60% of these mills are in the co-operative sector, 35% of the total are in the
private sector and rest in the public sector. Until the mid 50s, the sugar industry was almost
wholly confined to the states of Uttar Pradesh and Bihar. After late fifties or early sixties the
industry dispersed into Southern India, Western India and other parts of Northern India.

Almost 75% of the sugar available in the open market is consumed by bulk consumers like
bakeries, candy makers, sweet makers and soft drink manufacturers. The crushing season in the
country starts from October and reaches its peak in January before finally ending in March or April
of the next year. Mr. Samir S Somaiya is the current President of Indian Sugar Mills Association
(ISMA) and Managing Director of Godavari Sugar Mills Ltd.

3. Raw Material (Sugar cane) In India, sugarcane is the key raw material, planted once a year
during January to March. It being an agricultural crop is subject to the unpredictable vagaries
of nature, yielding either a bumper crop or a massive shortfall in its cultivation from year to
year.
 The sugarcane growing areas may be broadly classified into two agro-climatic regions:
Tropical – Maharashtra, AP, Tamil Nadu Subtropical - UP, Bihar, Punjab, Haryana, Gujarat,
Karnataka, Maharashtra and UP are the main cane producing states. Sugar cane prices comprise
more than 70% of the total costs of Sugar production.

4. Demand-Supply Mismatch 30% of the total consumption is used Reduction in cultivation

area by about directly by households, while 70% is used 17% during SY 2008-09, would result
in indirectly. Reduction in production of sugarcane to Sugar consumption is expected to grow
approx. 280.5 MT. at the rate of 4-4.5% because of Farmers are shifting to alternate crops
Steady growth in population by 1.3-1.4% p.a. like wheat, jowar, sweetcorn, bajra, etc.

Growth of per capita income by 6.5-7.5% p.a. which are more profitable. Sugar Prices
over last 5 years the lack of intervention from government is having potential to push sugar prices
to new high in Indian markets. The market will remain well above Rs.2000/qtl during the sugar
year 2009-10.

5. Government Policies and Interventions Statutory Minimum Price (SMP) and State
Administered Price (SAP) – As sugar falls under essential commodities, it is being regulated
by the state government in coordination with the Center. For the season 2009-10, the regime
is under tremendous pressure for declaring SMP as this crop has fallen from surplus to deficit
category. Subsidies – The Govt. has given transportation subsidy to sugar exporters in order
to release excess stocks piled up at millers end, but this has ended last September.

Huge Capex - During 2004-05 (Mulayam Singh) government had flooded sops for inviting
investments in UP which have seen overwhelming response. The state was able to garner around
Rs 30,000 crores in form of various investments. The sugar millers have also undergone huge debt
lead expansion\n based on the investment slabs dictated by regime. It is these debts only which the
millers are still tackling. Levy sugar – The govt. is planning to increase levy quota (for BPL under
PDS) from current 10% to 20-25% due to concern of increasing sugar price.
6. Integrated Sugar Manufacturing Model 100 Kgs of Sugarcane gives approx. 10 kgs of
Sugar, 5-6 Kgs of Molasses, 33 Kgs of Bagasse and around 4 Kgs of Press mud. 100 Kgs of
Molasses gives approx. 22-25 litres of Alcohol 100 Kgs of Bagasse can generate approx. 35
units of Power.

7. Indian Sugar Industry – Five Forces Analysis

A. New entrants – Medium Incentives given by the Govt. been withdrawn and new sugar units
are required to comply with levy quota regulations from 1st year of operations.

B. Competitors

C. High Bargaining power of Buyers

D. Bargaining power of Suppliers – High With around 500 units engaged in production of Govt.
influences distribution, As Govt. announces the purchase sugar, Industry is highly purchase price
of levy sugar price (SMP), it protects the fragmented and the free sale quota releases interest of
the sugar cane farmers for sugar

E. Threat of Substitutes – Low Alternate sweeteners to sugar are gur and khandsari, whose use
is declining.

8. Indian Sugar Industry – SWOT Analysis

STRENGTHS & WEAKNESSES

Higher End Product Prices:-Sugar is the main product of Fall in derivatives - The fall in prices
of derivatives like sugar mills, which is most likely to fetch record prices this ethanol, baggase,
waste or manure etc. will also have year. The mills that are able to secure cane supply will be the
adverse impact on almost all the companies. Biggest beneficiaries.

In recent past the mills have Currency risk: - Most of the companies which have exposure
undergone capacity expansion, which will increase their in form of overseas loans, imports etc.
will be vulnerable to processing capacity leading to higher productivity. The forex losses in
advent of rupee depreciation.

Favorable policy: - Like any other industry, sugar companies too have liquidity crunch which can
be meet through Sugar Development Fund of the Government of India under special case
schemes.

OPPORTUNITIES & THREATS

Seasonality: - Sugar follows 3-5 years cycle,

Which is Low Cane availability: - Limited or non-availability of cane function of prices. We have
already witnessed the bearish will eventually lead to early closure of mills. Phase following excess
supply.

Now the situation is of lower Unfavorable policy:- The call for change in policy will now
production and higher consumption, which calls for higher be via inflation route only, since for
securing supplies remuneration to the farmers for attracting higher government has already relaxed
norms for imports, which acreage coverage under sugarcane. Are acceptable at zero duty.

Crude oil revival: - The revival in crude oil prices will throw.

Higher debt: - The fund was raising capabilities of most of the industry into limelight again. The
derivative products of existing companies in this sector are under serious threat cane would be in
demand and supply constraints are amid ongoing tight liquidity. Clearly visible to push prices
higher.

Alternate Crops: - Alternate crops to sugarcane are more profitable.

SUGAR INDUSTRY CYCLE

Like any other agricultural product, cane production follows a cycle. This impacts the sugar
industry which has a typical of 3-5 year cycle. Higher sugarcane production results in a fall in
sugar prices and non-payment of dues to farmers. This compels the farmers to switch to other crops
causing a shortage, which in turn results in increase in sugarcane prices and extraordinary profit.
Taking into account the higher prices for cane, the farmers switch back to sugarcane, which
completes the cycle.

SUGAR PRODUCTION IN STATES

The following table shows level of sugar production (In Lakh Tonnes) in Indian States:

State 2002-03 2003-04 2004-05

Uttar Pradesh 58.74 46.08 50.32

Maharashtra 61.64 31.99 22.29

Karnataka 17.98 11.57 13

Tamil Nadu 17.04 11.9 9.84

Andhra Pradesh 11.88 8.81 9.75

Gujarat 12.38 10.77 8.32

 The sugar production in the states largely depends upon monsoon. From 1998 - 05 good
monsoon resulted a larger production of sugar in the country.

Cane Area, Yield, Sugar Production and Sugar Recovery Percent

Producti
on of
Area ‘000 Yield sugarca No. of factories in
Year Recovery %
ha. ton/ha. ne operation
(‘000
ton)

1999-00 4220 70.90 299324 10.20 423

2000-01 4316 68.60 295956 10.48 436

2001-02 4430 67.40 297208 10.27 434

2002-02 4361 64.60 281575 10.36 453

 2003-04 2995 59.1 236176 N.A. N.A.

It can be noted from the above table that though the recovery percentage has remained
stable during the last 5 years, the yield of sugarcane during the same period has reduced from 70
T/ha in the year 1999-00 to 59.1 T/ha in the year 2003-04. The low yield of sugarcane is a matter
of great concern to the industry. Cane development activity with specific target is necessary to
achieve improvements both in yield and quality of sugarcane.

MAJOR REASONS FOR LOW PRODUCTIVITY

Recently there has been a major reduction in area under sugarcane cultivation and its
yield mainly due to drought in almost the whole of tropical and sub-tropical regions. The effect
of drought, delayed payment of cane price and low sugar prices in the recent past have led to fall
in sugarcane production and closure of some sugar mills.

The incidence of woolly aphid as a new pest on sugarcane came to light in August 2002
in Belgaum district and moved swiftly to Bhadra canal areas and Cauvery basin in southern
Karnataka. The incidence and alarming rate of spread and severity has created panic among the
cane growers in Cauvery basin who have already suffered substantial losses due to drought during
the previous years.

The following interventions on the various issues are required for the purpose:

1. Sugarcane Variety
 Various experiments conducted under All India Coordinated Research Project (AICRP)
has shown that the newly developed varieties are suitable to be grown under specific climatic
conditions. Therefore only the recommended varieties are to be cultivated suitable to the regions.

Bihar records the lowest sugar recovery % cane as compared to other major sugar
producing States of the country. Against an all India average recovery of 10.36% in 2002-03,
Bihar’s recovery was only 9%, some factories have even recorded recovery as low as 7.0 –
8.23%. This is against an average recovery of 10.93% which was achieved by the Bihar factories
in 1942-43.

Special attention is therefore required to be given to varietal composition in regions

recording low sugar in cane. It was suggested by the stake holders that the Sugarcane Research
Institute, Pusa which is the only Research Institute in Bihar should be allocated adequate funds by
the Central and State Government for developing suitable varieties of sugarcane which are high
yielding and have high sugar content. It was noted that in some regions like Uttar Pradesh a
number of low sugared cane varieties continue to occupy large areas in spite of being rejected by
the State Government. Therefore, there is an urgent need for replacement of such rejected varieties
through extension services.

2. Water Conservation

Out of the total irrigated area in the country, nearly 58% is irrigated by Tube wells and
other wells, 32% by canals, 5% by tanks and remaining 5% by other sources. For conserving
water, all the area under well irrigation in sugarcane needs to be brought under drip irrigation. Drip
irrigation will facilitate improvements in production and optimize use of fertilizer and other
nutrients.

Lack of sufficient knowledge about the pest in the ecosystem and preparation to gear up
to situation among the technologies has been a major concern to suggest effective management
practices. The pest occurring mostly in tropical Asiatic region, cool and cloudy weather (19 – 35o
C) in conjunction with high relative humidity (85%) favored faster infestation of the
pest. Therefore, keeping in view the bio-ecology of the pest some of the agronomic practices to
mitigate the spread and ill effect has to be developed. VSI has extended its services to control the
diseases by developing and providing the natural enemies, viz. Trichgramma, Chrysopera,
Encarsia, Isotima, Dipha etc.

3. Alternate Feed Stocks

Sugarcane has been conventionally used as raw material for manufacture of sugar in
India. The sugarcane yield has remained stagnant for the past many years and the sugar content
also has not shown any significant increase despite efforts by the industry. The moot point is
whether the sugar industry should remain solely dependent on one crop, viz. Sugarcane or explore
the use of various other alternate raw materials.

Recent studies have shown that it is possible to cultivate sugar beet under tropical conditions
and that this can effect economics of the industry in many ways. Sugar beet can be used as a co-
crop to sugarcane to extend the duration of the crushing season and also to enhance the sugar
yields. It can also be used as a stand alone crop.

Another crop that can have a good potential in improving the economics of the sugar
industry is Sweet Sorghum. Sweet Sorghum can be processed alongside sugarcane or sugar beet
to produce ethanol. Therefore a combination of cultivation of sugarcane, sugar beet and sweet
sorghum can facilitate the sugar industry to have a right product mix and achieve commercial
sustainability on a global basis. A comparison of the features of the three crops clearly indicate
that each of the three crops have their own merits and demerits and a combination of these can
effectively solve the problems of adequate availability of raw material for the success of a sugar
complex.

The Committee recommends that the use of alternate feed stocks like sugar beet and sweet
sorghum may be encouraged and projects for seed development, cultivation and processing of such
crops may be provided loans from SDF.

4. Purchases through Intermediaries

The Committee observed that in Uttar Pradesh, the sugarcane is purchased by the factory
through cooperative societies, whereas, the factories deal directly with the sugarcane growers in
all the other major sugarcane producing States including Maharashtra, Andhra Pradesh, Tamil
Nadu, Karnataka and Punjab. The Committee noted that the Lok Sabha Standing Committee on
Civil Supplies and Public Distribution (1995-96) have recommended a direct link between the
factories and the farmers. In U.P. most of the sugar factories have already computerized the
following operation:

· Preparation of cane supply calendars

· Issuance of supply tickets to the farmers

· Making cane price payment through the banks

· Maintenance of grower-wise records etc.

The above functions were previously being done by the cane societies. Therefore the
Committee observed that the factories in UP should enter into a direct contract with the growers
like in other States and execute tri-partite agreement with banks and farmers for procurement of
sugarcane to facilitate use of Kisan Credit Cards and availability of soft loans to farmers.

5. Taxes on Sugarcane

The stakeholders expressed concern on the impact of the incidence of various taxes
including purchase tax on the profitability of the industry in the various States. The quantum of
taxes on sugarcane affects the capacity of the sugar mills to pay cane price. It was suggested that
if these taxes could be uniform throughout the country, level playing field could be
established. The Committee felt that it was not possible to achieve uniformity as these taxes are
in the purview of the respective States.

An alternate suggestion, namely that these taxes might be credited against VAT, which is
to be brought into operation from April 01, 2005 was discussed. It was brought to the notice of
the committee that some States are not agreeable to the crediting of such taxes against VAT and
in any case, matters of this kind are to be finalized by the Empowered Committee of State Finance
Ministers.

6. Infrastructure

The Committee after discussions with the representatives of industry and stake holders of
major sugar producing States observed that infrastructure required for sugarcane cultivation and
transportation is poor in many parts of the country.

Sugar industry in many States need better infrastructure like good irrigation facilities,
availability of power, properly maintained road for transportation of sugarcane from field to sugar
mills etc. The sugarcane cultivation in many parts of the country suffer from flood and water
logging. The causes for the frequent flooding in Bihar is due to release of excessive water from
Nepal. In states like Maharashtra and Karnataka sugarcane growers require basic facilities for
irrigation, power etc. Inadequate Infrastructure has adversely affected the yield and quality of
sugarcane.

The Committee therefore felt that the State governments should pay special attention to
provide and maintain necessary infrastructure like irrigation, power, roads and drainage etc. for
sugarcane cultivation and transportation.

7. Alternate Usages

Vacuum pan sugar factories are bound to produce plantation white sugar only. Some
presentations made before the Committee suggested that this restriction could be lifted and sugar
factories might be left free to produce other sweeteners like gur and khandsari, if they wished.

The Committee discussed the idea of allowing sugar mills to manufacture sweeteners other
than sugar if required. The Committee noted that the use of sugarcane for manufacturing products
other than white sugar should be commercially and legally examined.

INDIAN GOVERNMENT ON SUGAR INDUSTRY

The following policy initiatives are taken to boost the Sugar industry:

❖ Government declared the new policy on August 20, 1998 with regards to licenses for new
factories, which shows that there will be no sugar factory in a radius of 15 km.

❖ Setting up of Indian Institute of Sugar Technology at Kanpur is meant for improving

efficiency in the industry.
 ❖ In the year 1982, the sugar development fund was set up with a view to avail loans for
modernization of the industry.

Sugar has historically been classified as an essential commodity and has been regulated across the
value chain. The heavy regulations in the sector artificially impact the demand-supply forces
resulting in market imbalance.

Sensing this problem, since 1993 the regulations have been progressively eased. The key
regulatory milestones include de-licensing of the industry in 1998 and the removal of control on
storage and distribution in 2002.

However, policy still plays an important role in the industry.

Legislation

- Concept of Command Area which binds Cane farmers and Sugar mills to sell
and buy from each.
Sugarcane - Sugar mills have to purchase all the Cane sold to them, even if it exceeds
procurement their requirement.
- In case of capacity expansions at existing Sugar mills, there is uncertainty
regarding allocation of additional Area based on the expanded capacity.
- Government administered Statutory Minimum Price (SMP) which acts as a
floor.
Sugarcane
- States like UP, Haryana and Punjab fix a higher price for cane, called the
pricing
State Advised Price (SAP). . Historically, the SAP has been as high as 20-30%
above SMP.
- Government mandates 10% of sugar to be sold as levy quota sugar at prices
Sugar sales much lower than the market.
- The government also specifies monthly release quotas for free sale sugar.
Capacity and - Sugar producers are not allowed to own cane fields in India.
Production - New sugar mills cannot be set up within 15 km of existing units.
 - Imports of both raw and white sugar attract a basic duty of 60% and a
countervailing duty of Rs. 910 per ton.
Exports &
- In periods of sugar shortage, under the Advanced License Scheme (ALS),
Imports
license holders can import raw sugar without paying any duty, subject to the
condition that they re-export white sugar within a fixed period.
Others - Restriction on Cogen PLF, currently only in AP.

SUGAR INDUSTRY IN ANDHRA PRADESH

About Andhra Pradesh Sugar Industry

Andhra Pradesh (AP) abounds in maximum number of private sector sugar companies in
India along with Tamil Nadu and Karnataka. In the year 1933-34, vacuum process was adopted
for sugar manufacturing in the state. Previously, the state government was planning to support
Cooperative sector as against other sectors. However, with passing time, a considerable change in
the policy was noticed. Letters of Intent (L.O.I.) were given to the deserving entrepreneurs
including 20 LOIs to the private sector companies.

This gradually resulted in major benefits for the state

government as well as for India as a whole. Today, Andhra
Pradesh sugar industry ranks 3rd in terms of recovery and
5th in terms of cane crushing. As per production capacity is
concerned, Andhra Pradesh stands at the position 5 in India.

The agricultural laborers who do sugarcane harvesting and cultivation are employed in the
sugar industry in Andhra Pradesh. Today, the unprecedented growth of this industry in the state
has led to the consolidation of village resources and has facilitated communication, employment
and transport system here.

Types of Sugar Industry in Andhra Pradesh

Andhra Pradesh sugar industry can be classified into two parts such as organized sector
including sugar mills and unorganized sector including manufacturers of gur (jaggery) and
khandsari. The unorganized sector is often referred to as the rural industry. The rural industry plays
major role in the level of production.

ANDHRA PRADESH TOTAL SUGAR INDUSTRIES

Factory Name Village Nearest City
Empee Sugars & Chemicals Ltd. NAYUDUPET
Ganpati Sugar Industries Ltd., Fasalwadi / Kulbugoor Sangareddy
Gayatri Sugars Limited ADLOOR YELLAREDDY Kamareddy
GMR Industries Limited
(PARRY’S SUGAR INDUSTIRES Sankili, Regidi
LTD.)
GSR Sugars Limited MAAGI Nizamabad
K.C.P. Sugar & Industries Corporation
Vuyyuru
Ltd
K.C.P. Sugar & Industries Corporation
LAKSHMIPURAM
Ltd
Kakatiya Cement Sugar & Industries Ltd P E R U V A N C H A Khammam
P U N G A N U R - 517
KBD Sugars & Distilleries Ltd Mudipapanapalli
247
Madhucon Sugars Limited RAJESWARAPURAM
Navabharat Ventures Ltd SAMALKOT Visakhapatnam
NCS Sugars Limited Latchayyapeta
Nizam Deccan Sugars Limited MOMBAJIPALLY Deccan
Nizam Deccan Sugars Limited Muthyampet Muthyam
Nizam Deccan Sugars Limited Shakkarnagar Nizam
NizamDeccanSugarsLimited Muthyampet Metpally
Prudential Sugar Corporation Ltd KOPPEDU POST
Sagar Sugar & Allied Products Ltd Nelavoy Village
Sarita Sugars Limited Prabhagiripatnam
Sree Rayalseema Sugar & Energy Ltd Ponnapuram Nandyal
Sri Sarvaraya Sugars Ltd CHELLURU Chelluru
Sri Venkateswara Co-op. Sugar Fct.Ltd GAJULAMANDYAM Tirupati
Sri Vijayarama Gajpathi Co-op. Sugars
BHIMSINGHI Vijayarama
Ltd
BUCHINAIDU
Sudalagunta Sugars Ltd Mayuranagar
KANDRIGA
The Amadalavalasa Co-op Sugars Ltd AMADALAVALASA Amadalavalasa
The Anakapalli Co-op.Sugars Ltd Thummapala Anakapalli
The Andhra Sugars Ltd- Unit -I TANUKU Tanuku
The Andhra Sugars Ltd. - Unit -III BHIMADOLE Bhimadole
The Andhra Sugars Ltd., - Unit -II TADUVAI Taduvai
The Chittoor Co-Operative Sugars Ltd Chittoor
The Chodavaram Co-op Sugars Ltd GOVADA Chodavaram
The Cuddapah Co-op Sugars Ltd Doulathapuram Cuddapah
The Etikoppaka Co-op Agri & Indl
Etikoppaka Etikoppaka
Society Ltd
The Jeypore Sugar Co.Ltd CHAGALLU Chagallu
The Kovur Co-op Sugar Factory Ltd POTHIREDDIPURAM Kovur
The Nannapaneni Venkat rao Coop
JAMPANI JAMPANI
Sugars Ltd
The Nizamabad Co-op Sugar Factory Ltd SARANGAPUR Nizamabad
The Thandava Co-op.Sugars Ltd PAYAKARAOPETA Thandava

Trident Sugars Limited MADHUNAGAR Zaheerabad

In Andhra Pradesh there are 34 sugar factories of which are under co – operative sector
(including the new mills constructed in Tenali, Gurajala, Kurnool, Hanuman Junction, Kovvur and
Nandyala) 8 are under the public sector and private sector. Presently 39 factories are participated
in sugar cane crushing.
 Sugar industry continues to play a dominant role in the economy of other states as
sugarcane is one of the important commercial crops. The installed capacity of the 42 sugar factories
in the state is 54000 tones of cane crushing per day (TCD). During 1986-87 season the sugar
factories in the state crushed 56 lakh tones of sugarcane with an average recovery of 9.43% about
5028 lakh tones sugar was produced by these factories.

Directorate of Sugar and Commissionerate of Cane in Andhra Pradesh

Belonging to Industries and Commerce Department, the Directorate of Sugar and

Commissionerate of Cane has been vested with the power to guide and deal with the sugar factories
in Andhra Pradesh. It is the responsibility of the department to encourage sugarcane farmers and
to help this developing industry contribute effectively towards Gross State Domestic Product
(GSDP). The department also takes care of the technological advancements of the industry.

CHAPTER - III
COMPANY PROFILE
 PROFILE OF PARRY’S INDUSTRIES

INTRODUCTION:

EID Parry (India) Ltd is one of the largest business groups in the country. The company is
engaged in the manufacture and marketing of a wide-range of products that includes Sugar, Bio-
Pesticides and Neutraceuticals. The company made their presence felt across the globe by
developing and nurturing tie-ups with various organizations such as Sugarcane Research Institute
in Australia, Sugar Processing Research Institute in Louisiana, Tate and Lyle International in UK
and Mitr Phol Sugar Corporation Ltd in Thailand.

EID Parry (India) Ltd is a pioneer in the manufacture of plantation white sugar from
sugarcane. The British trader, Thomas Parry established the House of Parry in the year 1788. Parry
set up the first Sugar Factory in 1842 at Nellikuppam in Tamilnadu. In the year 1952, the company
factory at Ranipet launched 'Parry ware', their gleaming vitreous sanitary ware collection that
makes bathrooms decorative. In the year 1975, the company was converted into an Indian
company.

1788 – On July 17, Thomas Parry, one of the first

British traders to see the future that existed in 's rural areas
reached and established his business on piece goods and
banking.

The company became the member of the Murugappa group in the year 1981. In November
1992, the company acquired the sugar unit at Pugalur in Tamilnadu. The electronics division of
Murugappa Electronics merged with the company with effect from April 1991. In December 1995,
they acquired the pesticides business of Bharat Pulverising Mills and in March 1996, the wall tiles
project of the company at Karaikal commenced their production.

During the year 1998-99, the seeds division of the company was sold as an undertaking to
Parry Monsanto Seeds Pvt Ltd, in which Monsanto India Ltd holds 51% and the company holds
49% of the equity. The company along with Santhanalakshmi Investments Ltd acquired 95.96%
of the paid up capital of Cauvery Sugars and Chemicals Ltd.

In April 1999, the magnetic Media Unit at Mysore has been sold as a going concern to
Meltrack India Pvt Ltd. During the year 1999-2000, the company acquired Johnson Pedder Ltd
with sanitary ware unit at Dewas in Madhya Pradesh. Thus, the company became a wholly owned
subsidiary company. The company increased their capacity at Pugaur plant to 4000 TCD. In March
2000, they commissioned 2500 TCD green field plant at Pudukottai.
 Coromandel Fertilizers Ltd and Santhanalakshmi Investment Pvt Ltd became the
subsidiary of the company with effect from December 14, 2001 and January 31, 2002. Also, Parry
America Inc commenced their operation from January 2002. The Farm Inputs Division of the
company was de-merged and transferred to Coromandel Fertilisers Ltd with effect from April 1,
2003.

Also, Parry & Company Ltd and The Mofussil Warehouse & Trading Company Ltd
amalgamated with the company. During the financial year 2003-04, the company acquired 95%
stake in East India Sugars Pvt Ltd, Chennai that is engaged in sugar trading. During the year 2005-
06, the company incorporated Parry’s Sugar Ltd with an initial capital of Rs. 1.50 crore.

Parrys Investment Ltd became a wholly owned subsidiary of company during the year.
Santhalakshmi Investments Pvt Ltd was amalgamated with the company with effect form May 1,
2005 and subsequently Coromandel Bathware Ltd became a subsidiary. In March 2006, the
company transferred their Parryware division on a going concern basis by way of slump sale to
Parryware Glamourooms Pvt Ltd, a wholly owned subsidiary of the company for Rs. 160.66 crore.
Also, they commissioned 18 MW co-generation plant at Pudukottai. The company transferred
432580 equity shares of Rs. 10 each held by the company in Parryware Glamourooms Pvt Ltd in
favour of Roca Sanitario SA of Spain for the consideration of about Rs. 118.55 crore. Consequent
to this, PGPL ceased to be a subsidiary of EID with effect from June 1, 2006 and became a joint
venture company.

In December 8, 2006 the company entered into a joint venture agreement with Cargil Asia
Pacific Holdings Pvt Ltd, a wholly owned subsidiary of Cargill International. In March 2007, the
company commissioned 22 MW co-generation power plants at Pugalur. During the year 2007-08,
the company invested Rs. 45.92 crore in the equity of the Joint Venture entity, Silkroad Sugar
Private Ltd. In February 2008, the company acquired 51% stake in Phytoremedies Biolabs Private
Ltd, a company engaged in the business of Nutraceuticals the said company became a subsidiary
company.
 The company approved to sale 47% equity holding in Parryware Roca Private Ltd to Roca
Bathroom Investments SP, an affiliate of Roca Sanitario SA, Spain for a conideration of Euro
11,11,49,111. In November 2008, the company acquired 48% stake in a leading US Nutraceuticals
company. The Company proposes to set up Green Field Distilleries at Pudukottai and Sivaganga
entailing an overall investment of about Rs. 165 crores. Also there are in the process of setting up
a Sugar refinery in Food Processing Special Economic Zone of Parry Infrastructure Company Pvt
Ltd at Vakalapudi, Kakinada rural mandal, Kakinada.

SUGAR DIVISION:

Nellikuppam has been recognized as a Zero-waste plant with a strict adherence to quality
and high productivity. They have been the recipients of several awards and certifications with the
course of time. Some of the most significant achievements by the company are:

∙ ISO 14001 certification in Pudukottai & Nellikuppam

∙ The recipients of the Green Tech Award on Safety

∙ Instrumental in organizing a SHE event at the Murugappa Group level

EID Parry has 5 plants in the country situated at Nellikuppam in Cuddalore district, Pugalur
in Karur district, Pudukottai in Pudukottai district, Pettavaithallai in Trichy district and
Puducherry. The combined crushing capacity of all the five plants is 15800 (TCD) Metric Tonnes
of cane per day.

The Pudukottai unit of E.I.D. Parry bears testimony to the phenomenal instinct, the
company has, of honing onto potential possibilities and turning them into resounding successes.
The Pudukottai site had continuously been rejected as a prospective site for building a factory.
After several futile attempts to lure companies into building their units, the Government of India
approached Parrys requesting them to start a venture at Pudukottai.
 Although there was a lot of speculation and skepticism about the venture, Parrys took on
the project with their usual indomitable will and enthusiasm determined to achieve at least a
modicum of success. Currently, the Pudukottai factory is one of the largest revenue generators of
the organization clearly accentuating the determination and hard work invested in it by the
employees and management of Parrys.

NEW PLANTS IN ANDHRA PRADESH:

Indian sugar producer E.I.D Parry is renaming GMR Industries Ltd as Parrys Sugar
Industries Ltd after acquiring a majority stake in the company. Early this year, E.I.D Parry struck
a deal to acquire 51% in GMR Industries from its promoter GMR Holdings that marked the exit
of GMR group from the sugar business. Rothschild was the sole financial advisor to GMR Group
on the transaction.

Thereafter E.I.D made an open offer and as of end September owns 65% stake. GMR
Holdings continues to hold 22% in the loss-making small-sized sugar firm.

The deal was in line with GMR group's overall strategy to divest non-core assets and focus
on infrastructure and energy businesses in the future.

GMR Industries, which reported a net loss of Rs 30 crore for the quarter ended September
30, currently operates three fully-integrated sugar complexes in Andhra Pradesh and Karnataka
with a combined installed crushing capacity of 11,000 TCD (tonne crushing capacity per day), 46
MW of co-generation and 95 KLPD (kilo litre per day) of distillery.

Net loss of the company was Rs 30 crore for the July-September quarter as against a loss
of Rs 18.3 crore during the same period of 2009-10, the filing added.

Net sales of the company during the second quarter jumped to Rs 19.89 crore, slightly up
from Rs 16.65 crore reported last year for the same quarter.

Shares of the company were traded today at Rs 147 apiece on the BSE, up 0.38 per cent
from the previous close.

The company also holds a license to set up and operate an integrated sugar complex of
3,500 TCD sugar mill at Raibagh in Karnataka. It also owns land and license to set up another
plant in Andhra Pradesh.

Sugar is a cyclical industry and is one of the heavily regulated. The industry that follows a
four year business cycle saw prices peaking out in January this year and has retracted sharply since
then with almost a third decline in price.

EID PARRY Launches Branded Sugar

18 November 2004 marks yet another milestone in the 216 year old history of E.I.D Parry.
The day marks the first-ever launch of branded refined sugar by a South Indian company. The day
marks the launch of Parry's pure refined sugar.

Sugar making in E.I.D Parry's history dates back to 1842. It was then that the company
pioneered the production of sugar by establishing the country's first sugar factory at Nellikuppam.
This factory also holds the distinction of being the first ever integrated sugar complex in India.

Today, like in the past, the company continues to set standards in the sugar industry. Parry's
sugar has been initially launched in Tamil Nadu in one-kg refill packs and pet bottles. Every grain
of Parry's pure refined sugar is a product of a superior refining process and is processed
hygienically from first grade cane.

In addition, Parry's pure refined sugar has a longer shelf life of over 18 months and is
absolutely pure and free of all impurities.
Over the last two months since its launch, the brand has received good response. Not just
from consumers but also from the channel members. Over the next few months the company also
plans to expand its availability across the country. The success of Parry's pure refined sugar marks
just the first step in E.I.D Parry's foray into this business. The company's ambitious plans for the
future include sugar variants such as, brown sugar, a range of flavored sugar apart from sachets,
cubes, etc.
 PARRY’S SUGAR INDUSTRY - SANKILI DIVISION

PARRY’S Industry ISO 9001:2000 accredited Sugar division started production in 1997.
It has a cane crushing capacity of 5000 tones per day, Co-generation capacity of 16 Megawatt
(MW) and a Distillery unit capacity of 45 Kilo liters per day (KLPD). More significantly, this plant
has brought rapid economic development to Srikalulam district, a remote area in Andhra Pradesh.
Livelihood generated through it has helped to improve the economic & social standard of living
of the farmers.

The company uses the most advanced technology to produce two grades of superior
quality sugar, namely M - 30 and S - 30. It is the first fully fledged co-generation plant in Andhra
Pradesh with an installed capacity of 16 MW. The molasses produced from
sugar is utilized as a feed stock in the distillery and the bagasse produced from cane is used as
fuel for the boilers.

The Sugar Plant has adopted several cost-effective and steam-conservation technologies
such as Falling Film Evaporator, Vertical Continuous Pans and Short Retention Time Clarifier.
Through these measures it has been able to reduce the existing steam consumption from 35% to
32%, thereby earning the distinction of being the lowest steam consuming plant in the sugar
industry.

Financial structure:
The original cost of the project was Rs. 75 crores. The project was appraised by industrial
finance corporation of India (IFCI) for evaluating and the availability.The project founding was
as given below:
a) authorized capital : 75 crores

b) Issued and subscribed: 60,46,00,000.

 c) Opening capital: 59,29,00,000

1997
The sugar factory with an installed capacity of 2500 TCD is commissioned.

1997
An intensive cane development programme is launched. From the initial availability of 70,000
Metric Tonnes (MT) of cane in 1997, the availability is enhanced to more than 600,000 plus MTs
by 2004.

1999
Another Co-generation plant of 2.3 MW is added to the existing facility.

2001
A full-fledged 16 MW cogeneration facility is installed by August.

2002
Crushing capacity is further enhanced to 3125 TCD through modernization schemes.

2005
A distillery plant to produce Ethanol and Rectified Spirit is added, making it an integrated
sugar complex.

2006
Cane crushing capacity is expanded from 3,125 TCD to 5,000 TCD at an investment of Rs. 40
crore.

Fully automated, the plant uses bagasse during season and other biomass products
such as jute sticks, cotton stems, cane trash, groundnut shells etc. as fuel in off season.
Fact Sheet
Product Electricity

Date of
August 2001
commencement

Capacity 16 MW

Fuel Bagasse, cane trash and other biomass fuels

Location Sugar complex, Sankili

Distillery Modern distillery with zero pollution discharge and reverse osmosis to
reduce effluent generation by 50%.

An ISO 9001 certified Sugar Factory with latest state of the art technology including
provision for carbon-di-oxide recovery and zero pollution discharge. Uses advanced
technology like Falling Film Evaporator, Vertical Continuous Pans and Short Retention
Time Clarifier to reduce steam consumption from 35% to 32%

Fact Sheet
Location Sankili, Srikakulam District, close to Visakhapatnam Port, Andhra Pradesh

Crushing
5000 TCD
capacity
No. of
surrounding
500
villages
supported

Accreditation 9001:2000 American Quality Assessors

BOARD OF DIRECTORS:
The board of directors of the company has an optimum combination of executives and non –
executive directors. The board consists of eight members, of whom 4 directors are independent
and 5 directors are non – executive. Mr. K. V. K. Seshavataram is non – executive chairman.

NAME OF THE DIRECTOR DESIGNATION CATEGORY

Mr. S. Sandilya Chairman Independent & Non – Executive

Mr. D. Kumaraswamy Managing Director Promoter & Executive
Promoter & Non – Executive
Mr. V. Ravichandran Director
Independent & Non - Executive
Mr. N.Srinivasan Director
Independent & Non – Executive
Mr. K. Balasubramanian Director
Independent & Non – Executive
Mr. K. Ramadoss Director

BOARD MEETINGS:
Normally, the board meetings are held at least once in a quarter to review and discuss the operating
results and other items of the agenda. In addition, the Board Meetings are held whenever required.
The maximum time gap between any two meetings is not more than three calendar months.
Generally, the Board Meetings are held at the Corporate Office of the company at Hyderabad.
During the financial years the board met 27 times.

PARRY’S (GMR) Products and Technological Achievements

∙ The company mainly producing two grades of superior quality sugar, namely M - 30 and
S - 30 through the adoption of the latest technology.

∙ Several innovative Energy Conservation Measures have been adopted to bring down the
energy consumption levels. Steam consumption has been reduced from 35% to 32%, the
lowest steam consumption figure in the Sugar industry.

∙ As a part of Total Quality Management, the Group has introduced Quality Circle concept
for the first time in the Sugar Industry of Andhra Pradesh through voluntary participation
of the employees.

∙ The plant is the first in the Sugar industry of Andhra Pradesh to receive the ISO 9001-2000
certificate

∙ The Sankili plant is the first fully fledged co-generation plant in Andhra Pradesh, with an
installed capacity of 16 MW.

∙ The plant has 100% DCS controls generating power for both in-house consumption and
export to the grid.

∙ The plant is the first in Andhra Pradesh to undertake full-fledged cane trash procurement
and utilization as fuel in the boilers.

∙ The plant also has the most modern distillery of 45 KLPD capacity with Molecular Sieve
Dehydration system to produce best quality Ethanol and Rectified Spirit.

∙ Management's commitment towards environmental protection is exhibited through a

massive investment of Rs. 6.50 crores on Effluent Treatment Unit, incorporating Reverse
Osmosis Technology for the first time in Andhra Pradesh. The plant has also installed an
Anaerobic Digester and RCC bio compost yards to achieve `zero' discharge of effluents.

∙ The plant has been recognized by the Pollution Control Authorities as being a model
Effluent Treatment Factory. The Pollution Control Board has also rated it as a benchmark
 plant for other distilleries to emulate.

Major Awards

∙ Received SISSTA Awards for 'The Best Cane Development Factory' for the year 2002-03.

∙ Received the S.V. Parthasarathy Memorial Award from SISSTA for 'The Best Performance
Sugar Factory' for the year 2003-04.

∙ PARRYS (GMR) Sankili Sugar plant’s, Sr. Manager (Cane) was awarded the ‘Best Cane
Development Officer’ by the Regional Agricultural Research Station, Anakapalli for the
year 2002.

∙ 'Best Organization' Award for supporting Quality Circle Movement by the Quality Circle
Forum India, Hyderabad Chapter.

∙ The plant's Quality Circles received Excellent Awards at Regional and National Level
Competitions.

∙ First Sugar Factory in Andhra Pradesh to be accredited with 'ISO 9001:2000' in the year
2003.

Future plans

∙ Addition of Extra Neutral Alcohol (E.N.A) facility in the distillery to produce 45 KLPD
ENA.

∙ Additional facility for production of Refined Sugar.

∙ Full Plant Automation.

∙ Milk Chilling Plant for the benefit of the farmers.

∙ Bio-fertilizer Plant.

Implementation of Total Quality Management through various initiatives in the next few years
for achieving Business Excellence. Some initiatives include International Organization for
Standardization (ISO) 14000, Safety, Health, Environment (SHE) and Occupational Health &
Safety Assessment Series (OHSAS), 5 S and KAIZEN.
 CHAPTER – IV
INTRODUCTION

INVENTORIES:-
Inventories constitute the most significant part of current assets of large
majority of companies in India. On an average, inventories are approximately 60%
of current assets in public limited companies in India. Because of the large size of
inventories maintained by firm, a considerable manage of funds is required tobe
committed tothem. A firm neglecting the management of inventories wll be
jeopardizing its long - run profitability and may decree, e.g., 10 to 20 percent,
without any adverse effect on production and sales.

Inventory consists of raw materials, packing materials, consumables,stores

and spares, works in process and finished good. The scientific management of
inventory ensures the organization smooth running of product lines and servicing of
the customers by making available the required goods as per their requirements.

Sugar industry is peculiar in nature i.e. , the entire production activity is

carriedon the about4 to 5 month’s period commencing from November and ending
March. Sugar cane is the major raw materials for sugar production. Sugarcane is an
agricultural product and the company’s do not have 100% control over the supply
of sugar cane to the sugar factories, because of the yield of sugar factories,because
of the yield of sugar cane depends on so many climatic conditions , which are beyond
the control of farmers and management.
Stocking of raw materials i.e. , sugar caneis onle maximum of one
day’s production requirement. Hence, raw materials stock as a percentage to the
totalraw materials consumed wil be taken out at the end of the season and only little
quantity is in working process which will be reprocessed in the subsequent season.

THEORITICAL FRAME WORK

INVENTORY:-
The term inventory is a tangible property held finished goods,work in recess,
Raw materials including maintenance,and consumables.
DEFINITION OF INVENTORY:-
Inventory consists of usable but idle resources . The resources may be ofany
type, for example,men, materials, machines or money.when the resource involved
is material or good s in any stage ofcompletion, inventory is referred to as stock.

MEANING OF INVENTORY:-
The inventory refers to the stock pile of the product a firms offering for sale
and the components that make up the product . In other words, Inventory is
composed of assets that will be sold in future in the normal course of business
operations. The assets which firms store as inventory in anticipation of need can
be classified into

1) Raw Materials
2) Work – in -progress (Semi finished goods)
3) Finished Goods

(1) Raw MATERIALS:-

Inventory contains items that are purchased by the firm from others
and are converted intofinished goods through the manufacturing
prcess. They are important inputs for the final product.

(2) WORK – IN- PROGRESS:-

 Inventory consists of items currently being used in the production process.
They are normally partially or semi-finished goods that tare at various
stages of production in a multi stage production process.

(3) FINISHED GOODS:-

It represent final or completed product which are available for sale, the
inventory of such goods consists of items that have been produced but are
yet to be sold. The job of the final manager is to reconcile the conflicting
view points, of the various functional areas regarding the appropriate
inventory levels in order to fulfill the over all objectives of maximizing the
owner’s wealth.

Causes of inventory:-
External causes:- customers, Suppliers etc.

Internal causes:- Market, policy, production and SCM

Pro blems with high inventory:-
∙ Interests, Insurance costs.
∙ Quality deterioration.
∙ Wear ant tear.
∙ Storage and pilferage.

Inventory Turnover Ration:-

➢ ITR = Cost of production inventory
➢ Higer ITR Low inventories
➢ Low High inventories

High inventory Reasons:-

 ➢ Production
➢ More & Low volume products
➢ Large cycle times
➢ New and campaign product
➢ Non-moving products.

Marketing:-
➢ Improper planning
➢ Excess /short RM supply.

Suggestions:-
❖ Flexile production plans with tight monitoring
❖ Min & Max inventory levels and their up to date revision
❖ Cost benefits analysis in on carrying costs
❖ Review and disposal of non-moving inventory
❖ Reliability should is essential
❖ Dynamic approach is essential
❖ Coordination with market and plants.
❖ Adherence to commitments and time-to-time review is
must.

Selection of site:-
The following are the chief considerations which should determine the
selection of a site:
a) The site will be connected with road and rail, or if there is river transport ,
with water transport.
b) The existence of facilities for disposal of water or effluent water is
important. For this purpose some times special arrangement are necessary
though some times it may be possible to use existing waste land. Health
authorities will naturally have a say in the matter.
 c) If possible the site should be locating in goods surroundings. Question of
beauty should not be ignored.

STORES, SPARES AND PURCHASES:-

1) Store keeping
2) Store system
3) Various stores operation
4) Methods of pricing the material issues
5) Receiving section and issue department.
6) Purchase department
7) Stores and Spares
8) Purchasing system
9) Inventory .

➢ Different towards inventory

➢ Structure of inventory mocks
➢ Factors influencing inventory
➢ Classification of inventory

STORE KEEPING:-
It is serving facility, inside of an organization responsible for proper storage
of the materials and then issuing it to respective department on proper requisition.
Those items, which are not in use for some specific duration example Spare parts
and the Raw materials, are called stores and the building or space where these are
kept is known as store rooms.

According to Maynard “the duties of stock keeping are i.e. to receive

materials are to protect them while in storage from damage and unauthorized
removal, to issue the materials the right quantities at the right time to the right
place and to provide these service promptly at least cost”.

It is an establishment fact that more than Govt of the current assets are
invested in stores. Thus for efficient and economic utilization of fond-the
importance of store cannot be ignored.

FUNCTIONS OF STORE KEEPING:-

The main function of store keeping cane outlined as
❖ Receiving of goods in stores against damage and pilferage
❖ Custodian of goods in stores against damage and pilferage
❖ Effective utilization of stores space
❖ To provide service to the organization in most economic way
❖ Proper identification and easy location of them

OBJECTIVES OF STORE KEEPING:-

✓ Easy location of the items in store
✓ Proper identification of items
✓ Speed issue of materials
✓ Efficient utilization of space

FACTORS OF PLANT LOCATION:-

Primary factors:-
✓ Raw Material
✓ Market
✓ Fuel and power
✓ Transport
✓ Labor

Secondary factors:-

✓ Momentum of early start

✓ Industrial Atmosphere
 ✓ Special advantage of a place
✓ Soil and climate
✓ Personal factors
✓ Historical factors
✓ Political stability
✓ Special concessions and benefits

Stages in production control:-

✓ Planning
✓ Routing
✓ Scheduling
✓ Loading
✓ Dispatching
✓ Inspection

Advantages of production planning and control:-

✓ Efficient service
✓ Avoidance of rush orders
✓ Avoidance of bottlenecks
✓ Inventory control
✓ Economy in production time
✓ Equipment utilization

Types of layout:-
✓ Product or line layout
✓ Process or functional layout
✓ Combined layout

Factors in plant layout:-

✓ Basic managerial policies and decisions
✓ Nature of plant location
✓ Type of industry and process
Economics in production:-

✓ Use of automatic machinery

✓ Division of labor
✓ Utilization of by – products
✓ Timely and economical repairs and maintenance
✓ Acquisition of paten

Stores leader:-

The stores leader is very important because this facilitate the calculation of
the value of goods used for production purposes. It indicate the issue of materials
purchase of materials, finished goods. There are several methods for calculating
the issue price of the materials.
1) FIFO:-

Under this method is first issued from the earliest consignment on hand and
priced at which that consignment was placed in the stores. In other words
materials received first are issued first.

2) LIFO:-

The issues under this method are prices in the reverse order of
purchase i.e. , the price of the latest available consignment is taken.
This method is sometimes known as the replacement cost method
because materials are issued at the current cost to work orders expect
when purchases were long ago.

This method is suitable in times of raising prices because materials will be

issued from latest consignment at a price which sis closely relates to the current
price levels.

3 ) Base stock method:-

 Each concern always maintains a minimum quantity of material in
stock.This minimum quantity is known as safety or base stock and this should be
used when an emergency arises. The objective of this method is to issue the
materials according to the current prices

4)Avarage methods:-
In this method stock is divided by the quantity

5)Market price
The issues are made at the market prices

6)Inflated prices:-
This method is used for any wastage in the materials. Ex: 50 units are
purchased at Rs. 10 in 50 units will go for wastage.The issue price will be
500/40=12.5

Location and Layout:-

More often than not, in the matter of locating the stores, materials
management is rarely consulted. The normal practice is to locate the stores near the
consuming department . This minimizes handling and ensures timely dispatch. In
stores layout, governing criteria are easy movemeny of materials, good house
keeping, an d sufficient space for men and materials handling equipments, such as
shelves, racks, pallets and proper preservation from rain, light and other such
elements.
These problems are more important in the case of items that have a limited
shelf life.

Other important factors governing the location are the number of user and
their location, the volume and the variety of goods to be handled the location of the
central receiving section and accessibility to modes of transportation such as rail or
road.
Since stores have to be nearest to the sugar, large organizations usually have
stoes near consuming department, whereas receiving is done centrally. Items of
common usage are stocked in the central stores so that inventory is kept at an
optimum level. These factors are considered at the planning level of layout.

In the case of warehouses stocking finished goods, factors such as proximity

to ports, railway lines, quality of roads, availability of power , etc., become quite
important . it is also important that the stores are constructed with a futuristic
orientation, so that sufficient flexibility for explansion needs is inbuilt. The
activities of receving the goods, stocking in appropriate location, material handling
and issue must be done swiftly and economically. The stores building have
adequate facilities for preservation of stores.

Sometimes facilities such as cold storages, heating equipments, air

conditioning and similarly facilities may be required. These should be planned in
advance. Comfortable working conditions must be provided to the sotes personnel
to get maximum efficiency and morale.

The important factors in the design of stores building can be summarized as

follows.

Lighting:-
Clear and adequate lighting is amust for a work environment. Lighting
effects can be accentuated througha judicious choice of colors for there walls.for
stores personnel who workday in and day out in the stores receiving, checking,
stocking. Handling and issuing goods, a pleasing environment goes a long way in
reducing monotony. Any attempt to reduce these facilities will prove false in
economizing in the long run.

Safety:-
This factor is perhaps the most important aspects. In stores a large volume
of goods are handled every day. Accidents considerably reduce the morale and
effectiveness of the system. The following measures are necessary if accidents are
to be checked.

➢ Safety consciousness should be instilled in the minds of stores, personnel

through training programmers, visual aids and literature.
➢ Safety appliances, such as goggles, hand gloves, ect…., must bye provided
and their use must be encouraged.
➢ Good housekeeping is essential. This means that gangways must be clean,
adeqately wide so that movement of forklifts, trolleys and industrials
tractors is smooth. Stocking must be in appropriate locations so that
handling is minimum.
➢ All stores equipment must be keptin good order.this includes adequate
maintenance proactive with regard to forklifts, overhead
cranes,trolleys,conveyors, etc.operation must be trained in safety so that
safety persecutions are not overlooked.
➢ Healthy competitioncan be stimulated by installing ”safety awards” and
cash prizes which bring recognition to the concerned stores personnel fro
sweaty practices.This also motivates other to practice safety.
➢ Provision offire fighting facilities isnecessary especially where
inflammable materials are stored andhandled.In fact large organizations
have a well maintained the fighting equipment .
➢ Keep the stores in preparedness. This has in the run reduced losses and
reduced insurance expenses, fire extinguisher,fire escapes,alarms and
sprinklers must be available the personnel should be familiar in handling
them.
➢ Other factors which merit attention include provision of toilets, routines
maintainance equipment, safe electrical wiring, etc..,

Cost aspects and productivity:-

It is erroneously covered that every cubic meter of space must be utilized by
stocks for high efficiency.very often such stocking may drastically cut the spped of
materials movements and create bottlenecks alpart from affecting overall safety.

Therefore maneuvering needs for handling equipment and for minimizing

the time required for stocking,and issue, must be borne in the mind at the planning
stage in order to ensure real efficiency.

Cost involved in stores can be analyzed under two heads, viz.., fixed and
variable. Fixed costs are to be incurred irrespective of the utilization of space
stores. They include money spent on land and buildings rent interest, repairs
maintenance, and insurance. Etc.

Variable costs vary with the volume through output.they consist of handling
cost, damages, deterioration, obsolescence, etc.obviously when the throughout or
the volume goods handled ishigh, the total cost per tonne is low. This should be the
aim of the stores manager in order to optimize the costs in stores.

Problems and development:-

It is an unfortunate fact that stores management has been regulated as a
critical function, In the gamut of material management, a storeis considered as the
least glamorous and it never attracts talent.it is forgotten that the stores manager is
probably the custodian of the single largest group of currrent assets and plays a
pivotal role in ensuring smooth production besides assisting purchase activities
through timely support. This is the major problems and challenge that face stores
manager today.

Many decisions in stores management, such as selection of racks, handling

equipment,safety lpractices,codification training personneland accounting, call for
considerable, sick and an ability tocoordinatewith other department as well ads
with outside agencies. These aspects should be highlighted and appreciated so that
the store function is given due to importance.other areas in stores, such as records
keeping , movement analysis to reduce obsolescence, surlplus and damage are
critical to the profitable operation of the firm and the stores manager faces
hallenges in the areas as well.

In many organization the scrap yard also comes under control of the stores
manager. This is an entirely new responsibility calling for the ability to maximize
returns on the disposal of scrap. The chief stores officers for the function of
receipt, issue, kardex and sub-stores.

Besides coming into contact with the production, purchae aintenance,

inspection andinnce department to with in his organization , he has to come into
contact with outsiders like suppliers, transport carriers and bankers. In order to
meet such challenges the importance of the stores function should gradually gain
momentum and qualified engineers should be posted as chief stores officers
reporting to the materials manager.

ROLE OF FINANCE MANAGER INVENTORY MANAGEMENT:-

Optimum level of inventory and finding ensures to the problems of EOQ are
the recorder point and the safety stock. These techniques are very essential to
economize the use of resources by minimizing the total inventory cost. The
techniques of inventory management are very useful in data mining . the cases the
board frame works for maintaining inventories.

To the majority of the companies, inventory represents a substantial

investment. Thus the goal of wealth maximization is related to the financial
manager has an important role to play in the management of inventory. Although
it is not his operating responsibility to control inventory. He should be familiar
with in inventory control techniques and ensure that inventory is managed well.
Effect would be reduce inventory investment and increase the firm’s prospects of
making profits.

INVENTORY CONTROL:-
Inventory control renders to “The process where by the investment in
materials and parts carried in stock is regulated within predetermined limits set in
accordance with the inventory policy established by the management. The
inventory control is activity oriented process whereas inventory control is the
management process and the latter is the firm’s setup to be followed by the former.

Inventory control refers to a planned method of purchasing and storing the

materials at lowest possible cost without affecting the sales scheduled. Inventory
control therefore, is a scientific method of determining what, when and how much
to purchase and how much to have to stock for a given period of time.

The Needs for Inventory Control:-

 The rewards of inventory control system cannot be over looked in Indian
context the idea behind this is,

❖ Conserving valuable foreign exchange

❖ Release of capital
❖ Reduction in cost

The primary object of Inventory control is:-

➢ To minimize the idle time caused by shortage of inventory a
inventory Availability f inventory
➢ To keep down capital investment in inventories. Inventory
carryi cost and obsolescence losses

INVENTORY CONTROL TECHNIQUES:-

INVENTORY CONTROL TECHNIQUES

Selective inventory control inventory management

techniques

1. ABC Analysis 1. EOQ (Economic Ordr Quantity)

2. XYZ Analysis A. Ordering Cost.
3. VED Classification B. Carrying Cost
4. FNS Classification 2. System of Re-ordering.
5. SOS Classification
6. S-D-E Analysis
7. HML Analysis
ECONOMIC ORDER QUANTITY:-
One of the major inventory management problems to be resolved is how
much inventory should be added when inventory is replenished. If the firm is
buying raw materials, it has to decide lots in which it has to be purchased on cast
replenishment.

If the firm is planning production as per schedule. These problems are

called order quantity problem and task of th firm is to determine optimum
inventory level involves two types of costs:

1) Ordering cost
2) Carrying cost

The economic order quantity is that inventory level, which minimizes the total of
ordering and carrying costs.

Ordering costs:-
The term ordering cost is used in case of raw materials (or supplies)
and includes the entire costs of acquiring raw materials. They include costs
incurred in the following activities. Requisitioning, purchase ordering, transport
receiving, inspecting, and storing(store placement), ordering cost increase in
proportion to the number of orders placed , and one view is that so long as they are
committed cost they need not to be revoked in computing ordering costs.

Carrying costs:
Cost incurred for maintaining a given level of inventory are called carrying
cost, they include storage, insurance, taxes, deterioration and obsolescence’s

_______________________________

EOQ (economic order quantity)=√2 * quantity required * ordering cost

_______________________________
Carrying costs
ABC ANALYSIS:-
ABC Analysis is one of widely used inventory control tool. Under this have
to classify materials according to their important and concentrate more on critical
items. Importance of any items arises due to the two factors namely consumption
values and critically in use. Classification of materials according to importance
has its basis on the promise”Vital Few and Trivial Many”.

The classification based on consumption value is called ABC Analysis and

the classification hased on the critically of the items is called VED Analysis (Vital,
Essential and Desirable). Periodical consumption values are used as the basis for
VED Analysis. ABC is said to denote”Always Better Control”, the method of
classification of materials is also known as “selective method control”. The basis
of analyzing the annual consumption cost(or usage cost) goes after the principle
“Vital Few and Trivial Many”.

Items held in the stores can grouped into class A, B and C respectively based
on their Annual Consumption Values. It has been found in a large number of
organization that about 10% of the items contribute to 70% of the annual
consumption value, 20% of the number of items contributes about 20% of the
annual consumption value. Hence consumption value need to be controlled at the
highest level and these are the A items. The control of bottom 70% of the items
that contribute only 10% of the annual consumption value, that are denoted as C
items can be delegated to the lowest decision to the lowest decision making levels
while, the middle B items can be controlled by the middle levels of personnel.

“The following figures bring out clearly the concept of ABC Analysis

Category value Item 10% % of Annual

Consumption

A Item 10 70

B Item 20 20
 C Item 70 10

The Advantage of ABC method of Inventory control is as follows:-

It becomes possible to concentrate all efforts in areas which need genuine
efforts. This method products better results and involves minimum control. In the
case of A item careful attention is paid at every stage i.e., estimates of
requierements, purchasing safety stocks, receipts, inspection and issues. A close
watch on watch on high consumption items and their progress of replenishment
etc. maintained. In the case of C item which are numbers and at the same time in
expensive are loosely controlled.
The items fall under B category may be dispensed within the record keeping
system. This will help in saving time, money and labor without endangering
production schedule, it is mot effective and economical method as it is based on
the selective method . It helps in placing the orders, deciding the quantity of
purchasing safety stocks etc. Thus saving the organization from the unnecessary
stocks outs or surpluses.

VED ANALYSIS:-
VED analysis represents classification of items based on critically the
analysis classifies the items into 3 groulps called vital , Essential, desirable “Vital”
category encompasses those items for want of which production would come to
halt. “Essential” group includes items whose stock out is very “Desirable” group
comprises of items which do not cause any immediate loss of production would
come is high. “Desirable” group comprises of items which do not cause any
immediate loss of production of their stock out entail nominal expenditure and
causes minor disruption for a short duration.

HML ANALYSIS:-
HML analysis is the price based analysis. Thus analysis is generally used
for control of spares. The items m under this analysis are classified into 3 groups
which are called “High”,”Medium”.”Low”. To classify, items are listed in the
descending order of their unit price.

Ex:- The management may decide that all items of unit price above Rs.1000
will be of ‘H’ category. Those with unit price between Rs. 100 to Rs. 1000 will be
of ‘M’ category and those having unit price below Rs. 100 will be of ‘L’ category

F-S-N ANALYSIS-

F-S-N analysis based on the consumption figures of the items. The items
under this analysis are classified into 3 groups.

➢ F- Fast moving
➢ S-Slow moving
➢ N-Non moving

To conduct the analysis the lat date of receipt or the date of i.e. whichever is
later taken into account and the period, usually in terms of numbers monts
that has elapsed since the last movement is record.

X-Y-Z ANALYSIS:-

X-Y-Z analysis is based on value of the stock on hand . Items whose

inventory values are high are called ‘X’ items those inventory values are low are
called’Z’ items and ‘Y’ items are those which have moderate inventory stocks.

➢ Usually X-Y-Z analysis is used in conjunction with either ABC

analysis of HML analysis.

S-OS ANALYSIS:-
S-OS analysis is based on seasonality of the items and it classified the items
into 2 groups.
 ➢ S-Seasonal
➢ OS-off seasonal

S-D-E ANALYSIS:-

S-D-E analysis is based on problems of procurement Namely,

➢ Non availability
➢ Security
➢ Longer lead time
➢ Geographic allocation of supplier
➢ Reliability of supplier etc.

S-D-E analysis classifies the items into 3 groups called” scare”, “Difficult”, and
“East”. The information so developed is then used to decide purchasing strategies.
“Scare” classification comprise of items which are in short supply imported
through government agencies. “Difficult” classification includes those items
which are available indigenously but are not easy to produce. “Easy”:
classification covers those items which are readily available.

LEVEL SETTING:-
In order to have proper control on materials the following Levels are set:

❖ Re –order Level
❖ Ordering Level
❖ Minimum Level
❖ Maximum Level
❖ Average Stock Level
❖ Danger Level
❖ Safety Stock Level

Re –order Level:-
 It is the point at which if stock of a particular materials in store approaches
the storekeeper should initiate the purchase requisition for frresh suppliers of the
material. This level is fixed somewhere between the maximum an d minimum
Levels in such a way that the difference of the quantity of the materials between
the re-ordering level and the minimum level will be sufficient to meet the
requirements of production up to the time fresh supply of the material is received.

“Reorder level can be calculated by applying the following formula”.

Ordering level=Minimum Level+Consumption during the time require to get
the fresh delivery.

Another formula given by wheldon in his book’cost accounting is followi

Recording Level=Maximum consumption X Maximum re-order level period.

Ordering Level:-

This is the quantity of stock fixed between the maximum and minimum level
of stock. When this level is reached, it becomes the duty of the store-in –charge to
replenish the stock within reasonable time. This level is usually a little higher than
the minimum level. In order to be prepared for such emergencies as abnormal
consumption delay in delivery of new supplies etc., while fixing this level
following points are taken into consideration:-

➢ Time required for obtained fresh supplier

➢ Possible unexpected requirements which cannot be avoided.
➢ Possible unexpected delay in getting fresh suppliers because of rains
war, about unrest etc.

Minimum Level:-
 Formula level represents the level beyond, which the stock in hand is not
allowed to exceed. This is because:

If the stock exceeds this level, it will

➢ Involves more investment

➢ Requires more space for storages
➢ Amount to more wastage because of more handling spoilage,
obsolescence
➢ Involves more carrying cost

Excess stock will increase the cost of storage, thereby increasingly selling
cost. Excess stock will involve unnecessary blockage of working capital and
prevent its availability for a more profitable use.
Stock in excess will prevent the management from taking advantages of price
fluctuation and favorable market condition.

The fixation of maximum level depends on the following factors:-

➢ Rate of consumption of the material
➢ Money available
➢ Time required to obtain deliveries
➢ Storage space available
➢ Economic order quantity
➢ Market condition , seasonality and priced fluctuation
➢ Possibility of loss due to deterioration

The formula for the calculation of Maximum stock Level given by wheldon
is as follows:-

Maximum stock Level=Re- ordering+Re-ordering-quality

(Minimum consumption X Minimum re – ordering period)

Average stock level:-

 The average stock is calculated by the following formula. Average
stock level=Minimum stock level+1/2 of recorder quantity of ½ (Minimum
stock Level Maximum Stock Level)

Danger level:-
This means levels t which normal issues are made only under special
instructions. The purchases officer will make special arrangements to get
the materials which reach at their danger level so that the production may
not stop due to storage of material Danger Level=Average Consumption X
Maximum re-order period for Emergency purchase.

Safety stock level:-

This level is below the minimum level and represents the stage at
which emergency and immediately steps have to be taken for getting the
stock Replenished.

ORDER POINT:-
Order level must be such that, inventory at the time of ordering
suffices to meet the need of production during the procurement period

Ordering level= lead time in days for procurement *avg daily usage
The order level is normally greater than the normal consumption it is
equal to normal consumption plus safety stock.

Order level=normal consumption+safety stock safety stock:-

Safety stock is toi seek total protection against stock out. It can be
calculated by using usage rate and led time.

Safety stock=(max usage rate-avg usage rate)* lead time.

Safety stock of finished goods (sugar)=(377.24-279.18)*30

=98.06*30
=2,941.80MT
 Safety stock of raw material (sugar cane)=(3,007.4-2,739.2)*0.33
=268.2*0.33

=88.51MT

The following ratios are used in assessing the performance of the

company:-

STOCKING OF FINISHED GOODS:-

Finished goods are stocked in go downs for dispatching. Sugar
carreid with bags from machinery location to go down through trucks.

IN CHARGES:-
In charge for raw material is cane manager and in charge for finished
goods is sales executive

INVENTORY TURNOVER:-
This ratio indicates the efficiency of the firm in selling its product. It
is calculated by dividing the cost of goods sold by the average inventory.

Average turnover=cost goods sold

Average Inventory
Here cost of sold goods = Opening stock + Purchases+Manufacturing

Expenses – closing stock

The average inventory is the average of opening and closing balances of inventory.
In a manufacturing company inventory of finished goods is used to calculation
inventory turnover.

Average inventory= Opening stock+Closing stock

The reciprocal of inventory turnover gives average inventory holding in

percentage term. When the numbers of days in year (say, 180 ) are divided by
inventory turnover, we obtain days of inventory holding (DIH)
DIH=Average inventory* 180

Cost of goods sold

The manufacturing firm’s inventory consists of two more components.

➢ Raw Material
➢ Work in process

An analysis also is interested in examining the efficiency with which

the firm converts raw material into work in process and the work in process
into finished goods. That is, he would like to know the levels of raw materials
inventory an work in process inventory held by the firm on an average. The
raw material inventory should be related to materials consumed, and work in
process to the cost of productions
Raw material inventory turnover = material consumed

Average raw material inventory

Work in process inventory turnover = cost of production

Average work in process inventory

The inventory turnover show how rapidly the inventory is turning in to receivable
through sales. Generally, a high inventory turnover is indicative of good inventory
management. A low inventory turnover implies excessive inventory levels than
warrantee by production ans sales activities , or a slow moving or obsolete iventory.
A high level of sluggish inventory amount to unnecessary tie – up of funds,
impairment of profit and increased costs. If the obsolete inventories have to be
written off, this will adversely affect the working capital and liquidity position of the
firm. Again, a relatively high inventory turnover should be carefully analyzed. A
high inventory turnover may be the result of a very low level of inventory which
results in frequent stock outs. The turnover will also be high if the firm replenishes
its inventory in too many small lot sizes. The situations of frerquent stock outs and
too many small inventory replacements are costly for the firm. Thus, too high and
too low inventory turnover ratios should be investigated further. The components
of inventory many help to detect the imbalanced investment in the various inventory
components.

CHAPTER-IV
DATA ANALYSIS & INTERPRETATIONS
For improving the liquidity position of the firm, in order to ensure smooth
functioning of the firm in the GMR SUGAR LTD. The data gathered from
2004-2009 periods and with the necessary ratio will be evaluated as follows.

The data was evaluated through

a) Finished Goods Turnover
b) Work in process Turnover
c) Sales to Total inventory
d) Inventory to sales
e) Inventory proportion of Total Current Assets
f) Inventory Turnover Rations OF GMR SUGAR CO. LT

DATA COLLECTED FROM ANNUAL REPORTS

YEARS OPENING CLOSING EXPENDITU OPENING CLOSIN

STOCK RE
STOCK STOCK STOC OF
OF WIP WIP
Rs.Lakhs Rs.Lakhs
Rs.Lakhs Rs.Lakhs Rs. Lakhs

2007 5,186.44 1,0,66.79 16,81.25 173.43 91.91

2008 1,066.79 2,001.19 15,078.28 91.91 151.54

2009 2,001.19 3,605.85 14,262.60 151.54 84.97

2010 3,605.85 1,805.57 11,530.22 64.99 16.10

2011 1,805.57 5,316.27 12,307.13 16.10 248.14

2012 5,316.27 4,810.93 21,353.22 248.14 28.73

Table 1 FINISHED GOODS TURNOVER

S.NO YEAR COST OF AVG F.G HOLDING

GOODS INVENTOR TURNVOE PERIODE

SLOD Y R
Rs.Lakhs TURNOVE
Rs.Lakhs Rs.Lakhs R
Rs.Lakhs

1 2007 18,405.64 3,126.615 5.88 30.57

2 2008 11,414.09 1,533.99 7.44 24.19

3 2009 8,824.98 2,803.52 3.14 57.18

4 2010 13330.50 2705.71 4.93 36.53

5 2011 8796.43 3560.92 2.47 72.87

6 2012 19,521.40 5,063.615 3.85 46.68

FINISHED GOODS TURN OVER

 FINISHED GOODS DAYS OF INVENTORY HOLDING

INTERPRETATION:
Table -1 shows the finished goods turnover and days of inventory holding
. Finished goods turnover ranges from 2008 151.54, In 2012- 28.73 , there is a
significant decrease i.e., 121.81 when compared to 2010-11 was increase the firm
position was good in this year.

The days of inventory holding gives the time period of holding inventory and
it ranges form 180 days to 240 days. We can observe that there is and decreased by
in holding in 2012 when compared to previous year and it reveals the slackness in
performance of the firm.
 DATA COLLECTED FROM ANNUAL REPORTS
YEARS EXPENDITURE OPENING CLOSING

STOCK OF STOCK OF

Rs.Lakhs WIP WIP

Rs.Lakhs Rs.Lakhs

2007 16,818.25 173.43 91.91

2008 15,078.28 91.91 151.54

2009 14,262.60 151.54 84.97

2010 11530.22 84.97 16.10

2011 12307.13 16.10 248.14

2012 21,353.22 248.14 28.73

Table 2 WORK IN PROCESS INVENTORY TURNOVEFR

S.NO YEAR COST OF AVG WIP WIP DAYS
PRODUCTION INVENTORY INVENTORY INVENTOR
Y
TURNVOER
HOLDING
Rs.Lakhs Rs.Lakhs Rs.Lakhs
Rs.Lakhs

4 2007 14,285.99 132.67 107.68 1.67

5 2008 12,348.49 121.725 101.44 1.77

6 2009 10,429.64 110.255 88.19 2.04

7 2010 11530.22 50.535 228.16 0.79

8 2011 12307.13 132.12 93.15 1.93

9 2012 19,521.40 5063.62 48.68 3.85

WORK IN PROCESS TURN OVER

DAYS OF INVENTORY HOLDING

INTERPRETATION:-

Table II shows the work in progress inventory turnover and days of inverntory
holding and it range from 88.19 to 2.04 in 2009 it is 86.5 is decrease. where as
days of inventory holding ranges from 0.87 to 1.77. Especially in 2012 It is 3.85
and shows a significant increase when compared to 2011.

DATA COLLECTED FROM ANNUAL REPORTS

YEARS RAW OPENING RAW CLOSING RAW

MATERIAL MATERIAL MATERIAL
CONSUMED INVENTORIES INVENTORIES
Rs.Lakhs Rs.Lakhs Rs.Lakhs
2007 10,059.41 4,262.25 107.92
2008 7,055.21 107.92 94.78
2009 6,041.49 94.78 293.25
2010 5876.27 293.25 82.55
2011 6499.42 82.55 73.01
2012 16,103.71 73.01 65.89

Table 3 RAW MATERIALS TUROVER

S.NO YEAR MATERIAL AVERAGE RAW DAYS
CONSUME RAW MATERIAL INVENTOR
D MATERIAL TURNOVE Y
INVENTOR R HOLDING
Rs.Lakhs Y
1 2007 10,059.41 2185.08 4.60 39.10
2 2008 7,055.21 101.35 69.61 2.59
3 2009 6,041.49 194.02 31.12 5.78
4 2010 5876.27 187.90 31.27 5.76
 5 2011 6499.42 77.78 83.56 2.15
6 2012 16,103.71

INTERPRETATION:-
Table – III show the raw material turnover and days of inventory holding
raw material ranges from 5641 to 219.92 . It is 131.4 in 2011 and this indicates a
sudden slump and need to improve. Where as incase of days of inventory holding
it ranges from 0.82 to 3.19 to 2010 . It is 1.37 and shows a good performance when
compared to 2010.

Table 4 SALES TO INVENTORY

S.NO. YEAR SALES TOTAL SALES TO DAYS OF
INVENTOR INVENTOR INVENTOR
Y Y Y
HOLDING
1 2007 19,232.0 1,798.85 10.69 16.83
9
2 2008 15,254.6 2,688.47 5.67 31.72
2
3 2009 12,684.3 5,148.16 2.46 73.05
3
4 2010 10518.17 1821.68 5.77 31.17
5 2011 11759.81 5564.41 2.11 85.17
6 2012 21,627.8 4,810.93 4.49 46.68
5

SALES TO INVENTORY
INTERPRETATION:
Table IV shows that sales to inventory ratio and days of inventory holding
sales to inventory range. Where as 2011 sales inventory is 2.11 and days of
inventory holding is85.17,in the year 2012 sales inventory is4.49 and days of
inventory holding is 46.68 was decreased with comparing the last year.

Table 5 INVENTORY TO SALES

S.NO YEARS SALES TOTAL INVENTOR
INVENTOR Y
Y TO SALES%
1 2007 19,232.09 1,789.85 9.35
2 2008 15,254.62 2,688.47 17.62
3 2009 12,684.33 5,148.16 40.58
4 2010 10518.17 1821.68 17.32
5 2011 11759.81 5564.41 47.32
6 2012 21,627.85 4,810.93 22.24

INVENTORY TO SALES%
INTERPRETATION:
Table V shows the inventory to sales and it ranges from 47.32 to 22.24. it
reveals that in 2012 it is around which is futuristic when compare to 2011.

Table 6 INVENTORY PROPORTION OF TOTAL CURREM ASSETS

S.NO YEAR Inventories Total Proportion of

Current Inventories in
Assets Total
currrent
Assets
1 2007-2008 2,688.47 8,376.10 32.09
2 2008-2009 5,148.16 13,794.17 37.32
3 2009-2010 1821.68 3846.48 47.36
4 2010-2011 5564.41 7059.93 78.82
5 2011-2012 4,810.93 6,955.31 69.16

INVENTORY PROPOTION OF TOTAL CURRENT ASSETS

INTERPRETATION:
Table VI shows the inventory proportion to the current assets it ranges
69.16 % on an average. There is a significant level of consideration taken over
currrent assets. Decrease proportion of currrent assets indicates low solvency
position also explains the bad climate or strength of the company.
Proportion of Inventories in T.C.A = Inventories / T.C.Ax 100

INVENTORY TURNOVER RATIONS OF JEYPORE SUGAR CO.

LTD

YEAR/ 2007 2008 2009 2010 2011 2012

TICULARS
FINISHED 5.88 7.44 3.14 3.85
GOODS (30.57) (24.19) (57.18) 4.93 2.47 (46.68)
IRNOVER
ORK-IN- 107.68 101.44 88.19 48.68
PROCESS (1.67) (1.77) (2.04) 228.16 93.15 (3.85)
TURNOVE
R
SALES TO 10.69 5.67 2.46 5.77 2.11 4.49
TOTAL (16.83) (31.72) (73.05) (46.68)
INVENTO
RY
INVENTO 9.35% 17.62% 40.58% 17.32 47.32 22.24
RY TO
SALES
 CHAPTER - V

FINDINGS
&
SUGGESTIONS

FINDINGS
❖ The PARRYS SUGAR COMPANY LIMITED commenced operation in 2011
with a 450 TCD the expending to 8500 TCD.
❖ The companies maintain good safety rules will training to man power skilled
workers, unskilled workers.
❖ Store operations to Raw Material, goods finished goods is located is systematic
way, following on good rules.
❖ The PARRYS SUGARS LIMITED is using weighted average method for the
valuation of components of inventory.
❖ The by product, molasses is used for production of ethanol, which is used in
the production of alcohol. It is additional revenue for the firm.
❖ The maintain inventory carrying is used to online computer technology
maintain . There maintain is very systemic position.
❖ Raw machinery used in PARRYS SUGAR COMPANY LIMITED old
technology & it causes high man power utilization.
❖ Raw Material for the firm, Sugar Cane will dry if it is not moved before two
days. It leads to possibility of losses to farmers and company.
❖ To hedge the problem of power cut, the firms maintain its own electricity
generation plant.
❖ The company operate production activity is carried on in about 4 to 5 months
period commencing from November & ending March.
❖ Sugar cane is an agriculture product & the company’s do not have 100%
control over the supply of Sugar Cane to the Sugar factories, because of the
 yield of sugar Cane depends on so many climatic conditions, which are beyond
the control of farmers & management

SUGGESTIONS
❖ The firm has to sell 40% of the total production to Government. The
firm should use promotional strategies to sell remaining 60% of the
sugar.
❖ When the company uses new technology production will increase.
❖ Compare to various Sugar Cane factory competitions is reduced. To
use various new techniques method use.
❖ The company maintains own electricity generation plant. The period
of agriculture activities neighbor side of Rice mills to main problems
faced to power problem.
❖ Government should supply power continuously to farmers for their
bore wells for higher cane yielding.
❖ Irrigation facilities should also announce support cane well in advance
so that it could be possible to cane growers to determine for not
deserting forms cane to paddy, palm oil etc.,
❖ The level of Current Assets with respective to the Current Liabilities is
to also increase so that good Liquidity position be maintain.
❖ The sugar imports in Calcutta the company should have to plan in
issuing of cane harvesting permits in time to avoid the cane growers not
to produce Jogger.
❖ The company should improve its Liquidity to the extent of its finished
goods ideal turnover ration. Automatically it will lead to increase in
current ration. PARRYS SUGARS produce ethanol directly
from sugar cane, because of increase in demand for ethanol it also
reduces expenses incurred due to long period of holding sugars

BIBLIOGRAPHY

1. Prasanna Chandra, “INVENTORY Management”, New

Delhi: TMH publisher pvt., Ltd., 2001.

2. I M. pandey “ INVENTORY Management”, New

 Delhi: Vikas publishing House pvt., Ltd.., 1995.

3. I M . pandey “Managerial accounting”

4. Khan & Jain INVENTORY Management”
5. Charry, S.N., “production & Operations Management”,
New Delhi : TMH publisher pvt.., Ltd., 2000.
6. Goel, B.L., “ production & Operations Management “ , New
Delhi: , pragrathi ng House pvt.., Ltd.., 2000.

OTHER REFERENCES
∙ Manuals of Stores Department.
∙ Indian sugar journal.
∙ Five year Balance sheets (2007-2011).
∙ www.Google.com

Www.indiansugar.com
www.PARRYS.COM