Depreciating rupee not to affect prices: Sakthi Sugars

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Depreciating rupee not to affect prices: Sakthi Sugars

M Manickam, managing director of Sakthi Sugars talks about the issues grappling the industry and its impact on the company. He says that in the next 6-12 months sugar prices will rise either due to higher cost of production or reduction in production.

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M Manickam, managing director of Sakthi Sugars talks about the issues grappling the industry and its impact on his company.

He says that in the next 6-12 months, sugar prices will rise either due to higher cost of production or reduction in production.

Below is a edited  transcript of the interview. Also watch the accompanying video. 

Q: Are sugar prices expected to be subdued, what is your sense of how the next six months is looking like and what could be the impact be on companies like yours?

A: If you were to consider that Rs 2400 as realistic prices which UP has now announced and based on that we need a price of Rs 35-36 to breakeven. So it is likely that the prices will have to go there. Either that happens or it doesn't get there and the planting gets decimated, we have a shortage and prices go up in six months time.

Basically in another 6-12 months, where you would see the prices of sugar rising up either due to some realizations on policy makers that the cost of production is high and they allow the prices to move up or by default by reduction in production. We have at least seven reports filed to government of India and nothing has been acted upon. So we just have to wait and watch.

Q: What are the prevailing realizations and at Rs 240 for cane is it not profitable at all to produce sugar?

A: Today we are getting about Rs 29 and we are looking at Rs 240 under recovery of about 9%, almost Rs 26.40 is the pure cane price. When you are talking conversion, you talk about interest, levy being given at a lower price - together you are looking at Rs 34-35 as a breakeven. It is not going to be that easy that Government of India is expecting sugar is going to tackle inflation all by itself - that is not going to happen.

Q: We were speaking to Vivek Saraogi if Balarampur Chini earlier, is there any chance that Indian Sugar Mills Association (ISMA) will take the government to court on the matter?

A: We should take them to court. I am not sure what the outcome will, whether the state governments are going to listen to courts or the court will rule to prevail with farmers. Just by getting judgment from court the reality is not going to vanish away and the state government has already done the damage. After having announced the price, I don't think 'you take it back but the sentiment has been set'

Q: How do you see global prices panning out, we have seen them falling? Secondly, given those prices were falling is there really that much of a chance that domestic prices can rise much, will they not have to correct finally?

A: You were talking about rupee earlier and thanks to the government policy, even if rupee will go to Rs 60, we will still be okay.

Q: What is your call on global prices?

A; Global prices were USD 650 and Brazil has had a hit and if India goes down, global prices will be above USD 700.