Govt doesn't care about industry or farmers: Sakthi Sugars

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Govt doesn't care about industry or farmers: Sakthi Sugars

In an interview to CNBC-TV18, M Manikam, managing director of Shakti Sugars spoke about the latest happenings in his company and the road ahead.

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In an interview to CNBC-TV18, M Manikam, managing director of Sakthi Sugars spoke about the latest happenings in his company and the road ahead.

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

Q: Once again noises are getting loud with respect to some sort of deregulation coming in from the sugar industry. Given the fact that we have heard this multiple times, are you a little more optimistic? Have you received any communication from the government?

A: I am not optimistic because the communication with government has sent is that they don't care about the farmers as they have let the prices drop from Rs 30 per kg to Rs 27 per kg.

Earlier, I had been maintaining our breakeven at Rs 34. So when we were looking to go at Rs 34, they [government] brought us down to Rs 27.

It is a very clear signal. They don't mind arrears going up to the farmers and they don't mind the sugar crop doing down. They don't mind the sugar industry going into sickness, which is clear.

Whatever they talk on the podium is different but I am not happy about the signals they are sending to the industry.

Q: If the government is contemplating something at this point in time, what do you think they would come out with? And if yes, will something happen in the first half of 2012?

A; The best thing they can do is to get out of the industry. Just totally deregulate it, and be gone. But I don't think they are going to do that.

They are talking about consumer, consumer protection. Today, we have every administrative cost being increased. Government doesn't want to give subsidies on petrol. They don't want to give subsidies on milk, on transportation cost but they want the private industry, which is the sugar industry, to subsidise them.

I think it is talking from both sides and I don't see any clear indication on what they are going to do or what is going to be the practical step by them.

Q: Do you think at least more exports will be allowed because already about one million tonne is allowed under open general license (OGL)?

A: It is too late. You have international markets, which have tanked, and we have not been able to export any sugar. They had given permit for one million tonne and we have not been able to get anything moving. Right now, if you look at the shipment of sugar, nothing. Now they are saying you can open it up but nothing is going to move.

Q: The sugar production is expected to increase 17% in the past two months. Where do you see production for FY12 and what affect could we see on domestic sugar prices?

A: We are expecting about 26 million production and the government has again controlled domestic prices for instance they gave a released about 20 lakh tonne including levy for the month of December which should translate into about 24-25 million tonne of consumption but the government is talking of 21 million consumption.

There is a dichotomy; we are not really sure where they are going. And if the consumption picks up and we are very clear on it that, the prices should move up but as it is so consumer-oriented, prices will remains at Rs 27-28 until we run out of money in the industry and then we go into crisis again. We are looking at shortage to come in the next two years.

Q: Assuming that there is no relief from the government by way of any support mechanism, how bad will things get for the industry and particularly for Sakthi Sugars given the fact that QoQ we are seeing losses?

A: We are at the end of rainbow right now because they have exhausted most of the options. This maybe the last year that you have an issue because we see production picking up in the South and the prices may have to go up. If that happens we are fairly okay. If you look at the history it's a 10 year cycle and the peak comes in the second or the third year of the decade, it's always been that way since 60 years. So we are looking at a similar scenario. If we look at it with regards to performance, we should be at the end of the red and start turning around next year.