Even as the sugar industry in India is struggling to stay afloat, the idea of smooth sailing overseas apparently did not appeal to it. Vietnam's invitation to sugar manufacturers the world over failed to excite the Indian industry, barring a few exceptions.

The industry failed to take advantage of the excellent opportunities offered by Vietnam for setting up of sugar mills there. A sugar deficit country with very low per capita consumption of sugar, high domestic price and an ideal climatic condition for cultivating sugarcane, Vietnam offers excellent scope for sugar units. Added to that is the excellent equation India enjoys with the Vietnamese Government.

But the sugar industry is not capitalising on the excellent goodwill India has in that country. With the Vietnamese Government recently freezing fresh issue of licenses for the sugar industry, the chance that Indian sugar mills had of setting foot on Vietnamese soil now seems remote.

However, a few Indian units have indeed set up plants there and some are in the process of doing so. Nagarjuna Fertiliser's plant in South Vietnam has already commenced production while Rajshree Sugar's factory is likely to commence production by end 1998 in the same region. Dhampur Sugars is contemplating a unit in Southern Vietnam and KCP Ltd is setting up a plant in Central Vietnam.

It is a combination of factors that make putting up a sugar unit in Vietnam an attractive proposition. The country suffers from a sugar deficit with a low per capita consumption of about 7 kg per annum. Sugar production there is in the region of 3.50 lakh tonnes as against the demand of 7 lakh tonnes. Imports account for the shortfall. The cost of sugar is Rs 22 per kg while the cost of production is almost the same as that in India, ie, in the range of Rs 11 to Rs 12 - providing a very good margin. Although Vietnam is a communist country, unionisation is negligible.

Among ASEAN countries, Vietnam has the best potential for sugarcane plantations. Thailand is a sugar surplus country while Philippines and Indonesia have now become net importers of sugar from being exporters due to excessive industrialisation and the scope for cultivation of sugarcane is not very good.

Being on the same latitude as India, the country has similar climatic conditions especially Southern Vietnam (where cane forms nearly 85 per cent of the crop). Moreover, the country gets good rainfall which is an added advantage.

The yield per acre is about 40 to 60 tonnes in Southern Vietnam and 30 to 50 tonnes in North. The recovery rate is the same as in India. In the South, near the Mekong Delta it is in the range of nine per cent while it is 10 to 11 per cent in North.

In order to achieve a target of one million tonne sugar production by the turn of century, Vietnam had allowed 100 per cent foreign direct investments in the sector. The profits were fully repatriable after subjecting it to a 10 per cent withholding tax provided necessary foreign exchange was earned by the unit. The country also offered some tax incentives such as exemption from tax and a lower tax rates for a specified period of time. The capital market is yet to develop there and interest rates hover around 13 to 15 per cent for domestic currency loans.

Many countries have taken advantage of the conditions there and have put up units. France, Britain, Philippines and Australia have made forays in the country. Now that the targeted capacity is likely to be achieved, the country has frozen fresh issue of licenses.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.