Sugar, Ethanol and Paper

With obsession on paddy, sugar has gone by default in Sri Lanka. Sugar production at 6.4% of consumption necessitated the import of 467,000 tons at Rs. 25.1 billion. Since wheat was imported at Rs.29.7 billion, it was possible to peg rice imports at Rs.2.6 billion. Paper products were imported at Rs.34.9 billion.

Crude oil and other petroleum products were imported at Rs 249 billion. All import figures are for 2009. In what engagement was the Sri Lankan work force preoccupied, one would inquire? A strong case exists for diversified agriculture including the production of bio fuels.

Land Redundancy

In Sri Lanka paddy needs to shed its acreage in favour of other crops. The key to higher levels of paddy production lies in the scaling up of productivity. A breakthrough in improved seed production and extensive availability can come about through substantial private sector intervention. Enhanced fertilizer use is easily achievable with higher subsidies. Whittling down of welfare expenditure can meet the increase in subsidy payments. With colossal expenditure on irrigation, consistently incurred from Gal Oya to Mahaveli, Sri Lanka is well placed in the area of water availability. The country is therefore poised to produce adequate supplies of rice from shrinking extents of land if the corpus of policies and programmes are meaningfully synchronized.

When the immediate future is optimistically viewed, how will the consumer needs be met? Cereal consumption is 140 kg per capita per annum with rice and wheat in the ratio of 3:1. The composition of rice and wheat may fluctuate in the ratio of 70:30 and 60:40. The population is likely to level off at 24 million. Such a population would require 2.6 million tons of rice. To yield this quantum, an extent of 600,000 crop hectares sown over two seasons is required. Since cropping intensity is 1.5 the extent of land is 400,000 ha. To yield such an area 450,000 ha of asweddumised land needs to be secured. The extent rendered redundant is around 350,000 ha. If any shortfalls in production are anticipated, let the strategy be to step up productivity beyond 5 tons than to increase extents above 450,000 ha. Asweddumised extent available for paddy as of now is 800,000 ha. Higher productivity can render 45% of land redundant for paddy cultivation. High cost of production rendering exports impractical is the starting point of this computation.

Alternative Uses

To what productive purposes can such land be put? Sugar appears a likely choice on account of the versatility of cane products – sugar, ethanol and bagasse paper being primary among them. A look at Brazil will be illuminating and instructive.

Sugar and Ethanol

Brazil is the largest producer of sugar at 38.7 million tons. She is also the the largest exporter of ethanol fuel in the world and the largest producer of sugar ethanol. She becomes the second largest producer when corn ethanol of U.S is also reckoned with. Brazil recognizing the edge she had over sugar cane cultivation and sugar production appears to have worked from end use backwards. Escalating oil prices in 1973 -74, spurred the country to adopt a fuel policy in 1976 of blending 11% ethanol with gasoline. Since 2007 the blend became mandatory at 25% ethanol and 75% gasoline. A range of 20 – 25% is prescribed for 2010.

Increasing use was stimulated over the last 35 years with a comprehensive range of policies, well enunciated and steadfastly implemented. For inducing demand, prescription of the blend was primary. Automobile engines were modified for ethanol use ranging from 10% to 100%. Manufacturers produced flexi vehicles capable of easy switch to different blends or to run wholly on ethanol or gasoline. Even as use escalated, the challenge of demand was met through ethanol availability without constraint. This meant inducing production increases in cane and ethanol. In 100% of the filling stations numbering 33,000, ethanol was provided without any restraint.

Brazil’s use of sugar ethanol was facilitated by distinct cost advantages. Cost of production of a gallon was 83 US cents when the US produced corn ethanol at $ 1.14, while incurring a subsidy payment of 51 cents. Further, the input energy vs productivity ratio was 8.3 to 10.2 times in Brazil for sugar ethanol. It was 1.3 to 1.6 times for corn ethanol in US. Not surprisingly Brazil has devoted 44% of cane for sugar and 55% for ethanol. Of the 393 plants, 126 are dedicated to ethanol, 252 to both sugar and ethanol and only 15 to sugar only. Currently 25 plants with a crushing capacity of 50 million tons are under construction.

Research and Development

A threefold increase in sugar cane yields has been achieved in the last 30 years through research and development. By 2008 more than 500 cane varieties were cultivated in Brazil. In the last 35 years, ethanol yield has grown at 3.77% per year resulting in commendable cumulative increase in productivity. An yield of 2024 litres per hectare in 1975 rose to 5917 litres in 2004. With ongoing research, 9000 litres per hectare are expected in a few years. With such productivity increases in cane and ethanol, Brazil stands preeminently first in the world. More importantly, countries with the potential for sugar and ethanol will benefit by the research achievements of Brazil.

Sri Lanka’s Needs

For Sri Lanka what is the relevance of sugar cane, sugar, ethanol, molasses, alcohol and paper from bagasse? What role awaits Brazil? Sri Lanka possesses several lakhs of hectares of land having the requisite soil capability, water availability and climatic suitability to cultivate sugarcane with advantage. Extent cultivated in 2009 was a meagre 7,320 ha. The requirement of sugar per annum will reach 600,000 tons shortly. Production in 2009 was only 32,000 tons. Average yield of cane per hectare was 82 tons in 2003. It declined to 45 tons in 2009. The need for research as well as management can be clearly seen.

No ethanol was produced by Sri Lanka. In 2009 Brazil produce 24.9 billion litres which was 37.7 % of world production. Sri Lanka’s import of crude oil and other petroleum products amounted to Rs. 249 billion in 2009. Ethanol has the potential to replace 25% of gasoline. In Brazil the use is already 50%.

Molasses a by product of sugar can be used as feed supplement for milch cows, with good financial results. Molasses from palmyrah sugar made in 1982 in Jaffna was fed to dairy cattle in the cooperative dairy and records showed profitable results. Alcohol production adds further value to the sugar industry. It was produced earlier in Sri Lanka at the sugar complex.

Bagasse is the fiber residue left after extracting the juice. It is a feedstock for the manufacture of paper. In Sri Lanka Bagasse was never used to produce paper. Paper and paper products were imported to the value of Rs.34.9 billion in 2009. Scope exists for a profitable paper industry based on a waste product from the sugar industry.

Sri Lanka’s paddy land to be rendered redundant is 350,000 ha. A further 150,000 ha or more are obtainable in the three climatic zones. A typical ethanol plant has a capital cost of $150 million and requires 30,000 ha within reasonable proximity. For a beginning 150,000 ha can feed five factories. A Build Operate Transfer ( BOT ) mode can make the proposition practicable. Foreign collaboration with the indigenous private sector is another option. The country of choice to transfer sugar cane agronomy and ethanol technology is Brazil.

Brazil

Brazil is a vibrant economy ranking 8th in the world. With a GDP of $1.5 trillion, she has an FDI abroad estimated in 2009 at $ 124 billion. She commands the wherewithal for Sri Lanka to benefit from. Sri Lanka can call for investment in the field of sugarcane cultivation and production of sugar and ethanol from Brazil. An appropriate policy frame together with long term incentives would be requisites. Unsolicited investments would seldom come about. Pro active initiatives should be Sri Lanka’s approach.

Paper from Bagasse

Though paper was made from bagasse for quite some time, it’s increasing use has a recent history. The Tamil Nadu Newsprint and Papers Limited ( TNPL ) embarked on pioneering work to produce newsprint from bagasse in the early eighties and has now graduated to paper for sophisticated use. It is the second largest writing paper manufacturer in India producing 245,000 tons per annum. With ongoing expansion, capacity will reach 400,000 tons by 2011. Sri Lanka can solicit both technology and investment from TNPL.

Conclusion

Sri Lanka has an over abundance of land and water resources for a thriving sugar cane industry. After apportioning the requisite extents for forest cover, sanctuaries, food and horticultural crops, real estate and transport network infrastructure, there will be adequate land for developing the sugar industry. What is of crucial importance is the entry of a sophisticated mega investor like Brazil who can undertake comprehensive studies and investments on a turnkey basis. The outlay will be in billions and so will returns be.

source: island.lk