Sugar cos unsure of govt decontrol from Oct 1

Q: With international prices ruling pretty high currently and a fair bit of depreciation on the rupee front, are you expecting any significant ramp-up in exports currently?

Manickam: Exports would be going up. But Indian sugar is trading at a discount to international prices because we are exporting a 100 ICUMSA and not refined sugar. (An ICUMSA rating is an international unit for expressing the purity of the sugar in solution, and is directly related to the color of the sugar.) We are competing with domestic prices. The Indian export prices are almost at parity with domestic prices.

Q: We heard the government might move ahead on sugar decontrol. Do you have any faith of something coming in 2008?

Nopani: The sugar industry has been pressing for decontrol since a long time now. Only time will tell whether it actually comes about or not.

Q: Inflation is a key concern currently. Do you expect any sort of adverse or drastic reaction in terms of price controls or a possible banning of export subsidies or exports going forward, if inflation continues to remain at these levels?

Nopani: Inflation is definitely a serious issue as far as the Indian economy is concerned. Simultaneously, the sugar sector is in a different position. Sugar prices in North India came down in excess of Rs 1,700. Now, it is down to about Rs 1,300. As a result, farmers have not been paid for a long time and their realisation has been seriously affected.

I expect the government will not be too overly concerned. I see some correction as far as sugar prices are concerned, so farmers will be able to get some good realisations on their crop as well.

Q: Do you have any expectation of decontrol at all?

Manickam: They should decontrol. They have been talking about it for a long time. We hope they do it. They have almost decontrolled the sugar industry with the release mechanism that they have been talking about. So, it is more a moot point, whether they are going to decontrol or not. We think it should be done.

Q: We have seen a lot of diversion especially in the Brazilian markets towards ethanol production currently. Are you seeing any major change with crude oil prices so high or are we still at a very nascent stage?

Manickam: The basic problem in India is that we don’t have a free market with ethanol. We have a single monopoly with the Government of India who is buying everything. Unless the government puts in a very transparent mechanism for pricing of ethanol, it is not going to happen. We are waiting for the day when we have an option to buy petrol blended and sell ethanol. That will be easier.