Jan 03, 2011, 12.28 PM | Source: CNBC-TV18
Speaking to CNBC-TV18, Vivek Saraogi, MD of Balrampur Chini Mills said that the government has begun consulting states on sugar deregulation.
On the international front, he said the weather disruption in Australia and Thailand are driving international prices. “We expect global prices to be stable at current levels.”
Saraogi also informed that the government has begun consulting states on sugar deregulation.
Below is a verbatim transcript of the interview. Also watch the video.
Q: Do you think happy days are back for sugar—at least internationally and probably even getting there locally?
A: It’s good—the international markets are at 30 year highs. The local prices are pretty stable. They are at Rs 30 ex-factory level, so that’s the scenario as of now.
Q: What do you think production figures may look like for the year?
A: The estimate given by Indian Sugar Mills' Association (ISMA) is about 25 million. That seems to be in order. Crushing is in full swing, so we have a scenario where we have production, which is enough to meet the domestic demand. Plus there is a small surplus so there is first announcement of half a million tonne of exports allowed by the Ministry. It’s a beautiful scenario where you don’t have any kind of a shortage, therefore no kneejerk policy movements—stable policy, stable cane pricing and stable sugar pricing.
Also, you have a scenario where I am seeing for the first time in 24 years that India is exporting sugar and world market is at a high.
Q: International prices have already shot-up quite a bit though. What is your call for the calendar year even in terms of sugar prices—stable as you just said or with an upward bias likely?
A: The international price movement is related to weather. We have seen lot of damage in Australia and Thailand. The only person to feed the whole world is Brazil. Though production has moved up in Brazil obviously it’s lower than the expected figure. India will not be able to feed the world shortage as you want to put it because you barely have a 1.5 million surplus, which once the production comes in government might allow in tranches. I don’t think the world market is set to come off dramatically. It can remain stable and it should remain in this kind of a range.
Q: What is the situation in Uttar Pradesh specifically in terms of crushing levels this time around and what might happen once the next harvest comes into the market?
A: Uttar Pradesh (UP) has started crushing in full swing. This year’s cane price as we are aware the SAP is Rs 205. So mills are crushing at SAP; there is full cane and everybody is crushing at full capacity. The new crop, the sugar produced out of the new season, has already come into the market.
Q: What are your expectations for the domestic price? You think we will hold a 30 plus kind of a sugar price realisation level through the first part of 2011?
A: Possibly. It might come down because in peak crushing season—might come down half-a-rupee or Re 1 but them might move back Re 1. I would say for the Q1, this calendar quarter, that’s January-March, this seems to be a reasonable level.
Q: This kind of big surges is in commodity prices usually lead to a point to some kind of increased government intervention. How hopeful are you of any big move on the cane pricing policy this year?
A: This is a year where you have volume. This is a year where you can dispose off your surplus in the global markets at a price, which is at a premium to domestic price. You have no paucity of sugar in the country because the production is greater than consumption. So you have a scenario where there is no thinking of any kick-start policy up/down kind of measures. So I see very stable cane price, very stable policy like regime going into the next six-12 months.
On cane price, if you want me to talk on decontrol and deregulation, the government has begun its process of consulting the states which were the earlier mandate. It might take a little time but I think it’s basically on gear. There is a committee, which has been setup for cane price linkage with sugar price. The entire move is been done maybe little slow, too slowly for my liking, but it moving. It’s moving with direction.
Q: So is 2011 going to be the year when the Saraogi exit Balrampur Chini as was rumoured earlier or do you think you will wait for the next serious up cycle and get a better price?
A: If you are assuming there is an exit, you can time it better than me. I will consult you.