New cane pricing formula tough to execute: Balrampur Chini

However, Vivek Saraogi, managing director, Balrampur Chini told CNBC-TV18 that it would be difficult for companies to implement it . The panel has suggested a profit-sharing method so that even farmers can benefit from higher sugar prices.

According to him, one can expect stiff political resistance in Uttar Pradesh as far as new cane pricing recommendation is concerned.

"Cane and powers of fixing cane price are all delegated. If the Centre decides to change the law they are well within their rights and powers to do it. Having said that, in UP it is very difficult to implement," he explained.

He sees the Rangarajan Committee report getting acceptance in H2FY13. 

Below is the edited transcript of Sarogi’s interview with CNBC-TV18.

Q: The big suggestion is on new cane pricing formula hinging around the fair and remunerative price indicated by the Centre but your mills are in UP, do you think it is politically acceptable for the government of Uttar Pradesh (UP)?

A: Formula talks of linking cane price to sugar price with fair and remunerative price (FRP) as minimum. Personally, is the toughest part of the recommendation, it is going to be slightly difficult. It will be the last thing which will be pending.

Q: Do you think state will give up its powers to regulate the prices so completely and easily, UP being the largest state? Don’t you expect very stiff political opposition to this part?

A: I do, until they come up with legislation. There are two parts to it. Cane and powers of fixing cane price are all delegated. If the Centre decides to change the law they are well within their rights and powers to do it. Having said that, in UP it is very difficult to implement.

Q: But there is hope that at least the first step will be doing away with levy quota, do you expect that and how much of an upside would it mean for companies like yours?

A: That part is the most doable part and also the release mechanism suggestion. To the best of my understanding there is a consensus built around that. Even if you get 10%, if you give about 8.5 lakh bags at Rs 1,000, it is more than Rs 85 -90 crore per year for a company like us.

Q: What about other things like release mechanism and also freeing up export-import? How material could those be in your eyes?

A: That is going to give you freedom to decide how you are going to sell your final product you have an exchange in place now. The ultimate link will be when you are linking to the global exchange.

These are good measures. These are only ways world discover sugar price, not by releases but by exchange prices. Being global interlinked that is the best way to move ahead.