It is good that the government is taking cognizance of the sugar sector and taking steps that can aid the industry, says M Manickam of Sakthi Sugars.
According to him, the government diverting excess four million tonne of sugar capacity into ethanol and ensuring that oil companies will buy it is a huge positive. The Rs 6,000 crore interest-free loan will also go a long way in helping the ailing sector, he adds.
Manickam says mills may be in a position to clear Rs 4,000-5,000 crore, with their own resources. So, this Rs 6,000 crore will be an addition.
Below is the verbatim transcript of M Manickam's interview with Surabhi Upadhyay on CNBC-TV18.
Q: What are your first thoughts on the announcements of Cabinet Committee of Economic Affairs (CCEA)?
A: It is really good that we have the government now looking at this industry and taking some positive steps and what we have heard is that they are looking at a Rs 6,000 crore loan for the industry and also that they are planning to divert about excess of four million tonnes of sugar capacity into ethanol and the oil companies will be buying ethanol. So, that will be a welcome step.
Q: What about payment of arrears because a lot of these measures are tied up with the payment of arrears to farmers which stand at somewhere around Rs 20,000-21,000 crore. Do you see those getting cleared?
A: The Rs 21,000 crore, the mills may be in a position to clear Rs 4,000-5,000 crore, with their own resources. So, this Rs 6,000 crore will be an addition. So, we still might have about Rs 3,000-4,000 leftover. We might need to look at another package or another support. Or if sugar prices move up, that might be sufficient as well.
Q: In terms of loan that is being offered to the industry, this interest free loan that the government is talking of, how helpful is it going to be and particularly for yourself, for Sakthi Sugars, would you be looking at taking any kind of advantage of the policy that has been announced today?
A: The loan is after all a loan. So basically, we do get our cash flow from this issue.
Q: What is the sense on pricing and just the way you see demand-supply dynamics shape up? Do you at all see the pricing dynamics becoming slightly favourable to the industry?
A: Right now, what we have is sugar prices are hovering around Rs 22-24 and the cane prices hovering around Rs 25-28. So, we have a disparity of over Rs 7 per kilo. So, we need sugar prices to move up to about Rs 31-32 for it to be viable. So, if the government is buying ethanol, that might set the pace where the sugar prices will go up and be viable or the other option is implement or organise a committee recommendation where the sugarcane price get linked to the sugar price.
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