In a bid to aid the ailing sugar industry, the government is looking to export surplus sugar of around 4 million tonne through a barter trade with other nations. At the moment, sugar export is nil considering prices are too low.
M Manickam, MD, Sakthi Sugars, says this is good news for the industry. For the next year, the industry is looking at production of around 28 million tonne with consumption at 25 million tonne. However, he adds that the industry will be opening next year with 10 million tonne closing stock.
He says India can only strike such a deal with Indonesia or perhaps Iran or such other Middle Eastern countries.
Below is the verbatim transcript of M Manickam's interview with Surabhi Upadhyay on CNBC-TV18.
Q: We are seeing the reaction on stocks play out already. How much of a relief would this be if indeed four million tonnes moves out of the domestic market?
A: Four million tonnes out of the market because next year we are looking at a production of 28 MT and a consumption of about 25-26 MT. So, which will actually mean that we will be drawing down on our opening stock if four million tonnes actually goes out. That will be really good news for the industry as such.
Q: So, would we be opening out the new year than no surplus, at least on an even keel?
A: We will see. If we are opening right now with 10 million tonnes closing stock this year, if we export four million it will go down to six and you will have surplus of two million again. So, we are still in surplus but not as a disaster as it would be with those exports.
Q: The actual possibility of such a barter deal going through till we get more details from the government, in your sense in the industry discussions that you would have been part of, what sort of a barter can India hope for and with which nations can we strike this barter, or who do you willing to pick up the sugar is my question?
A: Probably only Indonesia, that is only country which can probably take it up because they are major importers rather than the countries they are talking about Australia, Canada and all that, I don’t think they will import sugar. Indonesia will be the only one unless we strike something with Iran or some other country in the Middle East.
Q: How will pricing dynamics play out in this, what is your sense I understand this is some kind of a barter deal so we don’t know if there is a price negotiation involved but again it is a question in the air, how do you think such deal can be negotiated from India\\'s interest point of view?
A: I don’t know, it is purely left to the government. What kind of pricing that they want to support the domestic market and at what price they are going to buy out. That is an open point, I wouldn’t be able to comment on it very clearly.
Q: Prices in the global markets have also not been anything to write home about if you could just give us some sense of whether there has been any stability or any sign of a pick up, so in terms of international prices where they stand vis-a-vis domestic prices, how is the equation looking?
A: International prices are far lower than the domestic prices. Right now we are looking at raw sugar of about 10.7 cents, which is fairly low and white sugar about 345 so we are looking at around Rs 20-21 for white and maybe 16-17 for raw so it is fairly low at this point of time.
Q: Pricing within the Indian market given that we will be opening the New Year anywhere on surplus, whether it is 10 million tonnes or 6 million tonnes, what do the next couple of months mean for pricing in India?
A: We are still in a negative territory, we need Rs 34 to breakeven, we are at Rs 20 so if we go to maybe Rs 22-24 we will probably make a little less loss than what we would have made otherwise.
Q: Do you see that number coming, 22-24 as we head towards the festive season and if these efforts indeed start bearing fruits -- some of the surplus moving out?
A: If the government is working on it, it should.
Q: So what sort of a price appreciation would you have in mind for the next couple of months then?
A: If this whole thing goes on, maybe another Rs 2-3. I don’t think it is going to be more than that.
Q: A lot of this is obviously being sold politically in the form of a relief package for farmers, the government will not want to be seen as helping only mills, the idea is to get mills in a better financial position so they can pay off those huge cane arrears I think Rs 20,000 crore at last count, how and when do you see those payments moving?
A: We need to get the cash in our banks, before we start taking them.
Q: So if 4 million tonne moves out that would be amounting to Rs 20,000 crore of cash coming to the Indian sugar industry?
A: At the current prices, it will be not more than Rs 8,000-10,000 crore.
Q: So half of the arrear amount would come through if indeed we manage to do this barter and move out 4 million tonne?
A: Absolutely.
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