Harinagar Sugar Mills Ltd 2008

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HARINAGARSUGAR MILLS LIMITED

Annual Report and Accounts2007 - 2008

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HARINAGAR SUGAR MILLS LIMITEDMUMBAI

DIRECTORS:

SHRI MADHUSUDANLAL N. PITTIE

SMT. RADHABAI B. PITTIE

SHRI MADHAVLAL N. PITTIE

SHRI VTVEK M. PITTIE

SHRI LUXMINARAYAN B. AGARWAL

SOLICITORS :

MESSRS. D. J. KAMDIN & CO.

MESSRS. N. C. DALAL & CO.

AUDITORS :

MESSRS. KULKARNI & KHANOLKAR

Chartered Accountants

COST AUDITORS :

P. M. NANABHOY & CO.

BANKERS:

State Bank of India

REGISTERED OFFICE :

207, Kalbadevi Road, Mumbai - 400 002.

ADMINISTRATIVE OFFICE :

World Trade Centre, Centre - 1, 10th Floor,

Cuffe Parade, Mumbai - 400 005.





HARINAGAR SUGAR MILLS LIMITED

MUMBAI

Regd. O f f i c e : 207, Kalbadeui Road, Mumbai-400 002.

NOTICE

NOTICP] is hereby given that the SEVENTY-SEVENTH Annual General Meeting of theShareholders of HARINAGAR SUGAR MILLS LIMITED, will be held at it's AdministrativeOffice at World Trade Centre, Centre No. 1, 10th Floor, Cuffe Parade, Mumbai - 400 005 onTuesday, 30th September, 2008 at 5.30 p.m. to transact the following business :

1. To receive and adopt the Report of the Directors and the Audited Balance Sheet andProfit & Loss Account for the year ended 31st March, 2008.

2. To declare a Dividend.

3. To elect a Director in place of Shri Madhusudanlal N. Pittie, who retires by rotationunder Article 102 of the Articles of Association of the Company and being eligible, offershimself for re-election.

4. To elect a Director in place of Shri Vivek M. Pittie, who retires by rotation under Article102 of the Articles of Association of the Company and being eligible, offers himself forre-election.

5. To appoint Auditors for the Current Year and to fix their remuneration.

By Order of the Board of DirectorsFor HARINAGAR SUGAR MILLS LIMITED

Mumbai, L. B. AGARWALDated : 31st August, 2008. Director

NOTES : 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING ISENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OFHIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER.

2. THE REGISTER OF MEMBERS AND TRANSFER BOOKS OF THECOMPANY WILL REMAIN CLOSED FROM MONDAY, 22ND SEPTEMBER,2008 TO TUESDAY, 30TH SEPTEMBER, 2008 BOTH DAYS INCLUSIVE.\

3. MEMBERS ARE REQUESTED TO NOTIFY IMMEDIATELY ANY CHANGEIN THEIR ADDRESS TO THE COMPANY.





HARINAGAR SUGAR MILLS LIMITED

MUMBAI

Directors' Report to the Shareholders for the Year ended 31st March, 2008.

Sir/Madam,

1. Your Directors have pleasure in presenting herewith the Report and Audited Statementof Accounts for the year ended 31st March, 2008.

The following are the financial results :

Gross Profit subject toDepreciation and Taxation

Brought forward from the previous year as perProfit & Loss Appropriation A/c

Excess provision for Income Tax(earlier year) written back

Excess provision for Wealth Tax(earlier year) written back

Year ended

TOTAL

31.03.2008

Rs.

12,08,69,247

21,24,72,314

44,16,255

33,77,57,816

31.03.2007

Rs.

7,61,61,690

22,78,08,851

4,559

30,39,75,100

Out of this, provisions have been made forYear ended

31.03.2008

Rs.

7,22,53,607

47,16,000

16,70,000

43,640

2,31,00,000

(i) Depreciation

(ii) Provision for Income Tax (current year)

(iii) Provision for Fringe Benefit Tax (current year)

(iv) Provision for Wealth Tax (current year)

(v) Provision for Deferred Tax Liability

(vi) Transferred to Molasses Storage Tank Fund -

(vii) Provision for Income Tax (earlier years) -

(viii) Provision for Fringe Benefit Tax (earlier year) —

(ix) Interim Dividend (already paid) -

(x) Corporate Tax on Interim Dividend (already paid) -

(xi) Proposed Dividend 9,59,952

(xii) Corporate Tax on Proposed Dividend 1,63,144

(xiii) Transferred to General Reserve —

(xiv) Balance carried over to next year as perProfit & Loss Appropriation A/c 23,48,51,473

TOTAL 33,77,57,816

31.03.2007

Rs.

5,69,11,776

16,40,000

33,424

12,21,000

2,41,76,109

2,47,311

1,60,240

47,99,760

6,73,166

16,40,000

21,24,72,314

30,39,75,100




2.

3.


HARINAGAR SUGAR MILLS LIMITED, MUMBAI

Your Directors are pleased to recommend a dividend @ Re. I/- per share for the year ended31st March, 2008, which will be paid after approval by the Shareholders. The proposeddividend shall entail an outflow of Rs. 11,23,0967- (inclusive of Corporate Tax on dividend).

Your Company has been diligently implementing and meeting all its obligations in respectof pollution control as stipulated by the Bihar State Pollution Control Board as well as theCentral Pollution Control Board. Your Directors are pleased to inform you that yourCompany has been given Industrial Pollution Control Award from time to time by theBihar State Pollution Control Board as per details mentioned as under:-

1996-

1997-

1999-

2000-

2004-

2005-

1997

1998

2000

2001

2005

2006

First AwardThird AwardThird AwardFirst AwardThird AwardSecond Award

For the year 2006-07 and 2007-08, the Bihar State Pollution Control Board has not awardedthe "Industrial Pollution Control Award" to any unit.

4. Season 2007-2008 : The following are the figures of Cane Crushed, Sugar Produced andSugar Recovery during the Accounting Year/Sugar Year 2007-2008 and 2006-2007.

Year

Period of

Crushing

Gross days

Cane Crushed(Qtls.)

Cane CrushedPer gross day(M.T.)

Net SugarProduced(Qtls.)

Sugar Recovery

Accounting Year Sugar Year1st April to 31st March 1st October to 30th September

2007-2008

01.04.2007

to

31.03.2008

2006-2007

23.11.2006

to

31.03.2007

2007-2008

06.12.2007

to

05.04.2008

2006-2007

23.11.2006

to

13.04.2007

130

9,810

9.57

129 122 142

1,27,52,952.44 1,21,22,054.62 1,19,56,637.96 1,32,10,065.74

9,397 9,801 9,303

12,20,562.51 11,00,461.63 11,59,794.32 11,91,545.63

9.08 9.70 9.02






The cane crushed and sugar recovery of your Factory during the season 2007-08 have been the highest in the State of Bihar.

5. Distillery :

(a) Your Directors are pleased to inform that the 45 KLPD Ethanol Plant wassuccessfully commissioned on 5th March, 2008.

(b) The production at the Distillery stabilized in a very short period of time withoutany significant teething problems.

(c) The quality of the product has been well appreciated by the buyers.

The relevant figures pertaining to the operation of the Distillery Plant during theAccounting Year 2007-2008 are as follows:-

i) Period of Production 05-03-2008 to 31-03-2008ii) Duration (days) 27iii) Quantity of Molasses distilled (Qtls.) 55,042iv) Alcohol produced (B.L.) 12,28,960v) Alcohol recovery (%) 22.33

6. Sugar Policy during the Season 2007-2008 and onwards :

(a) The Levy : Free ratio is maintained at 10 : 90.

(b) Sugarcane Price :

(i) The Statutory Minimum Cane Price for the season 2007-2008 was increased videNotification No.GSR 759(E)/Ess.com./Sugarcane dtd. 06th December, 2007 fromRs.80.25 to Rs.81.18 per quintal, linked to a basic recovery of 9% with a premiumof Rs.0.90 per quintal for every 0.1% increase in recovery above 9%. The minimumprice so payable by your Factory was Rs. 81.18 per quintal at gate.

(ii) The sugarcane price paid by the Industry in Bihar for the season2007-08 was Rs. 967- per quintal at factory gate comprising of Statutory MinimumCane Price (SMP) as notified by the Government of India and Advance againstadditional cane price (payable in instalments), if any, under clause 5A of theSugarcane (Control) Order, 1966.

(iii) The sugarcane price paid by the Industry in Bihar for the season 2007-08 wasRs. 87.50 per quintal at outcentre comprising of Statutory Minimum Cane Price(SMP) as notified by the Government of India after deducting transport rebateand Advance against additional cane price (payable in instalments), if any, underclause 5A of the Sugarcane (Control) Order, 1966.

(iv) An additional amount @ Rs.5/- per quintal was being paid for certain specifiedvarieties i.e. CoP 9301, CoS 88230, CoS 8436 & CoS 96268.

(v) A deduction @ Rs.7/- per quintal was being made for specified rejected andunapproved varieties i.e. CoSe 92423, CoS 91269 & CoLk 8102.






(vi) In addition to the sugarcane price being paid by the Industry in Bihar for theseason 07-08 as mentioned above, the State Government, in order to encouragethe farmers to grow sugarcane and so as to ensure that they receive anappropriate sugarcane price, has declared a subsidy of'Rs.7/- per quintal and thesame shall be paid to individual growers by way of Account Payee Cheque/Transfer by Bank Advice for the quantity of sugarcane supplied by them duringthe said season to any sugar factory of the State. The disbursement of the saidsubsidy amount shall be made under the overall control and supervision of theconcerned District Magistrate who, in turn, shall be assisted by the concernedCane Officer.

(c) Levy Price :

(i) The Ex-factory price for levy sugar for the season 2007-08 has not yet been fixedby the Government of India. In the meantime, factories in North Bihar Zone havebeen advised to charge a price of Rs. 1409.30 per quintal which was the priceprevailing in the season 2003-04.

(ii) The issue price of levy sugar sold through Public Distribution System (P.D.S.) hasremained at Rs.13.50 per kg.

(iii) The Department of Food & Public Distribution, Government of India, hasinstituted an enquiry into the cost structure of the sugar industry and hasaccordingly made a reference to the Tariff Commission, Ministry of Commerce& Industry, to undertake a study of zonal conversion cost schedules,escalation formula, return on capital and other issues related to determina-tion of levy sugar prices for the sugar season 2007-2008 to 2009-2010. The saidexpert body has not submitted its report in this regard till date.

(d) Excise Duty :

(i) The rate of excise duty on levy sugar and free sale sugar continues to be the sameas was fixed vide Notification No. 7/2006-Central Excise dtd. 1st March, 2006 and isas follows:-

Levy sugar : Rs. 387- per qtl.Free sale sugar : Rs. 717- per qtl.

Further, in addition to the above, Sugar Development Cess at the rate of Rs.147- perquintal was also payable in case of both levy sugar and free sale sugar upto31-12-07. From 01-01-08 the rate of Cess was increased from Rs.14/- to Rs.157- perquintal vide Notification No. S.O. HE) dtd. 1st January,2008. The rate of Cess wasfurther increased from Rs.157- per quintal to Rs.247- per quintal with effect from01-03-2008 vide Notification No. S.O. 392(E) dtd. 25th February, 2008.

(ii) The excise duty on molasses was maintained at Rs.7507- per tonne fixed videNotification No. 3/2006-Central Excise dtd. 1st March, 2006.






(iii) In addition to the above excise duty, Education Cess @ 2% on the excise duty sopayable is also applicable on all excisable goods (i.e. in case of sugar, molasses,ethanol and impure spirit).

(iv) Further, Secondary and Higher Education Cess @ 1% of the aggregate of dutiesof excise has been imposed on excisable goods (i.e. in case of sugar, molasses,ethanol and impure spirit) with effect from 1st March, 2007. This Cess is inaddition to the Education Cess of 2% as mentioned above.

(e) Future Trading :

The National Commodity and Derivatives Exchange (NCDEX) has made the followingchanges/new introductions with regard to sugar:-

i) The open interest limits have been revised with effect from February, 2008as under:-

A) From 7,500 tonnes to 20,000 tonnes for members and from 2,500 tonnes to7,500 tonnes for clients in respect of the near month.

B) The total open interest limit in respect of all months was increasedfrom 30,000 tonnes to 50,000 tonnes for members and from 10,000 tonnesto 20,000 tonnes for clients.

i i ) With effect from contracts pertaining to January, 2009 and onwards, the followingchanges have been made:-

A) Seller may deliver 'S' Grade sugar against the contract of 'M' Grade sugarat a discount of Rs.55/- per quintal.

B) Sugar of only current season must be delivered.

C) Two new delivery centres have been opened at Gorakhpur and Sitapur.

ii i) Future contracts are available up to 12 months as against only 6 months whichwas available hitherto i.e. now future trading up to 12 months is permitted.

(f) Sugar Exports :

(i) The validity period of the cash incentives by way of part re-imbursement ofexpenditure incurred for the purpose of internal transport and freight charges(including ocean freight and handling and marketing charges) available on exportof sugar under Open General License (O.G.L.) has been extended up to 30thSeptember, 2008 vide Order dtd. 28th March, 2008 issued by the Departmentof Food and Public Distribution, Government of India i.e. payment ofRs.13507- per tonne of sugar exported from sugar mills located in thecoastal states of India and payment of Rs. 14507- per tonne of sugarexported from sugar mills located in states other than the coastal statesof India.






(ii) The Chief Director (Sugar), Department of Food and Public Distribution,Government of India, vide letter No.4-4/2007-ES dtd. 28th March, 2008 hasextended the period of non-cash incentives by another six months bothin respect of exports of sugar under Advance Authorization Scheme as well asunder Open General License as follows:-

A) The quantity of sugar exported would be exempted from the levy obligationtill 2nd July, 2008 in respect of exports under Advance Authorization Schemeand up to 22nd July, 2008 in respect of exports under Open General License.

B) The quantity of sugar released for export would be treated as advancenon-levy (free sale) releases, to be adjusted in the non-levy stocks of the sugarfactories after a period of 12 months in respect of sugar exported up to 2ndJuly, 2008 under Advance Authorization Scheme and in respect of sugarexported up to 22nd July, 2008 under Open General License.

(iii) The Government of India has extended the validity of Duty Entitlement PassBook Scheme (DEPB) by another year i.e. upto 31st March, 2009 - exports ofsugar would be entitled to benefit under this scheme.

(iv) Due to the various incentives given by the Government of India and initiativestaken by Indian Sugar Exim Corporation (ISEC) for promoting the export of rawsugar, which has constituted more than 50% of the total quantity of sugar

. exported, India will export in 2007-08, the largest quantity ever in its historyin a single sugar year (1st October to 30th September). It is expected that thetotal quantity of sugar exports from India during this sugar year would bein the range of 4.5 million tonnes.

(g) Ethanol :

(i) The Ethanol blending programme i.e. doping of Ethanol with petrol (EBP)is progressing at a very slow pace across the country.

(ii) Presently, the quantity of Ethanol being lifted by the Oil Companies is onlyequivalent to approximately 3% blending on an All India basis.

(iii) Although the Group of Ministers (GOM) had recommended 10% blending to bemade mandatory from October, 2008, no steps for implementing thisrecommendation has been taken either by the Government of India or the OilCompanies.

(iv) No decision has been taken on the recommendation of the Department of Foodand Public Distribution, Government of India, i.e. to amend the Central SalesTax Act, 1956 through appropriate legislation to include "denatured anhydrousalcohol of minimum 99% strength" in the list of "goods of specialimportance" so as to facilitate unhindered interstate movement of Ethanol.

(v) Your Company succeeded in getting tenders for supply of Ethanol to depots inJharkhand State. However, due to levy of import duty on Ethanol by the State






Government, it has become unviable for the Oil Companies to supply Ethanolblended petrol and thus they have not commenced purchases of Ethanol againstthe tender so awarded to your Company.

(vi) The Oil Companies are not issuing/finalizing tenders for purchase of Ethanol inWest Bengal/Chhatisgarh due to levy of various taxes/duties andimposition of various conditions by the respective State Governments therebyrendering the entire Ethanol blending programme unviable for the Oil Compa-nies.

(vii) The various State Governments still continue to impose restrictions on the useof Molasses for production of Ethanol and give priority to production ofRectified Spirit used in the manufacture of Country Liquor.

(h) The specifications of Organic Fertilizer manufactured using Press Mud and SpentWash from distilleries have been deleted from the Fertilizer (Control) Order, 1985vide Notification No.837(E) dtd. 10th April, 2008 issued by the Ministry of Agriculture,Government of India. This will help in removing the hindrances which were beingfaced by various sugar factories having attached distilleries, in selling the Bio-compostbeing manufactured by them.

(i) Interest Free Loan :

(i) With a view to improve the liquidity position of sugar factories for enabling themto clear cane price arrears of sugar season 2006-07 and cane price of sugar season2007-08 relatable to statutory minimum price for the respective sugar seasons,to the sugarcane farmers, the Government of India, vide Notification dtd. 7thDecember, 2007 has notified the "Scheme for Extending Financial Assis-tance to Sugar Undertakings, 2007" ('SEFASU', 2007).

(ii) The salient features of the said scheme are as under :-

A) Interest free loans equivalent to notional Central Excise Dutypayable on total production of sugar during sugar season 2006-07and 2007-08 shall be granted to the sugar factories. The Central Excise Dutyshall be net of Sugar Cess.

B) The above mentioned loan amount shall be sanctioned to each sugar factoryby the concerned banker providing working capital facilities to the concernedsugar factory.

C) Full interest subvention (upto maximum 12%) will be provided to allbanks giving this facility to the sugar factories - 5% will be met out of generalbudget provisions of the Central Government and the remaining 7% from theSugar Development Fund.

D) The total duration of the loan would be 4 years including 2 yearsmoratorium and thereafter to be repaid in 24 monthly instalments.




Harinagar Sugar Mills Ltd 2008

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