Govt should mull export hike of more 1 mt: Dwarikesh Sugar

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Govt should mull export hike of more 1 mt: Dwarikesh Sugar

Vijay Banka, CFO, Dwarikesh Sugar Industries in an interview with CNBC-TV18 said, "There is clearly space for another 1 million tonnes of exports because our stock position is very comfortable. We produced about 24.2 million tonne of sugar in 2011. So, clearly there is space for allowing more exports."

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The government has allowed export of additional 5 lakh tonne of sugar under the Open General Licenses (OGL). (Click  here to read more) 

Vijay Banka, CFO, Dwarikesh Sugar Industries in an interview with CNBC-TV18 said, "There is clearly space for another 1 million tonnes of exports because our stock position is very comfortable. We produced about 24.2 million tonne of sugar in 2011. So, clearly there is space for allowing more exports."

Also Read: Expect a hike in sugar prices post monsoon says Balrampur Chini

Below is the verbatim transcript of his interview with Gautam Broker and of CNBC-TV18. Also watch the accompanying video.

Q: First of all the industry is been able to get 5 lakh tonne and in additional OGL export from the government. How much will you be able to allow to export and what will be the contribution in revenue in bottomline from these additional exports?

A: Government has been kind enough to allow 5 lakh tonne of export under OGL so individual allotment to unit is expected. The notification should take a couple of days to come. If it is 5 lakh tonne we should expect about 4 lakh tonne of exports for us. Since we are located in the hinterland we will not be able to export directly.

We will sell our entitlement to those who are closer to the port. Considering the prices that are prevailing today USD 740 per London White of our lower income of stock sold. Considering dollar at Rs 45 and considering the domestic market prices in the southern states of around Rs 2,550.

Q: So the differential between the FOB price here and the domestic prices would be about Rs 4-5 you are saying?

A: Exactly.

Q: This is very positive for you all but in general could you tell us where the realizations for the company stand at?

A: The prices have been depressed for quite some time. This export that has been announced has provided a small fillip to the domestic prices. We are yet not closer to the breakeven prices.

It's definitely a welcome step. Going forward the government can also take some positive policy initiatives such as allowing higher time for holding the stock for the institutional users as well as the people on the supply chain. These steps if taken, should provide a little more upwards to the prices and which should augur well for the industry.

Q: Looking at the demand-supply balance would you expect the government to allow any further exports under OGL this season?

A: There is clearly space for another 1 million tonnes of exports because our stock position is very comfortable. We produced about 24.2 million tonne of sugar in 2011. So, clearly there is space for allowing more exports. But, the food inflation is perhaps a big worry for the government and which is there in the back of their mind. Perhaps they will adopt a wait and watch approach.

Q: What's your expectation of the next season somewhere closer to about 26-26.5?

A: Exactly. 26 to 25 million tonnes. It is going to be a surplus year. Globally also things are looking good. 2010-2011 was a surplus year as compared to the deficit year which went before that.

Q: After this export allowance where do you expect domestic prices to settle at in the next couple of months?

A: This 5 lakh tonnes have not impacted the domestic prices significantly. We have only seen Rs 25-30 per quintal. Its early days to talk about how the prices will be ahead. Like I said the sentiments are more depressed and few more quality policy initiatives should come out in support of the prices.