India should conserve sugar stock to deal with shortage: Sakthi

The government has cracked the whip on sugar companies and has asked them to release more sugar in the market to curb the rising price of the commodity.

Reacting to this development M Manickam, Executive VC of Sakthi Sugar said told CNBC-TV18 that the government is worried about the rising price and wants to keep it in range of Rs 35-36 per kg.

He opines that the country should hold its sugar stock rather than  pumping it in the market to reduce price as there are chances of a shortage.

If India conserves its stock then we are looking at prices in the band of Rs 40-42 per kg, he said.Below is the transcript of M Manickam’s interview to Sonia Shenoy, Manisha Gupta and Anuj Singhal on CNBC-TV18.Sonia: Can you start off by telling us what was the rationale behind this government’s decision according to you and what is the quantity of the sugar that could be released in the market over the next few months?A: They were little worried that the prices were going a little higher than what they wanted to keep it at. But, it is still about Rs 35-36, which is about the minimum price that we require and possibly, we are again panicking a little too soon because we are looking at an estimate of 23 million for next year, that is an official estimate. If you remember last year, the official estimate was 27 million and we did 25 million. So, if they are talking about 23 million this year, we could even go lower. So, it is better to conserve the stock rather than trying to bloat off now to keep the prices down. So, I am not sure if it a very wise move at this point of time. We will have to wait and see what happens.Anuj: Just talking about your numbers, they did not look too good, while the rest of the sector has posted good numbers, what went wrong for you in particular?A: Results are not out yet. We are having a board meeting on Friday.Sonia: You did say that Rs 35-36 is where the prices are currently, so perhaps the government is panicking a bit or all of us are panicking a bit on this particular move. What is the sense that you are getting about prices as a whole? Where do you see prices 3-6 months from now?A: The world market is almost at Rs 40 today. So, you are looking at the world market at USD 550 plus and we are looking at the world market, at this level even without India importing sugar. If India were to start looking at importing sugar, you will be looking at Rs 40. So, if India want to conserve the stock, we should be looking at prices around Rs 40-42 at least to maintain and conserve the stock. Right now we are panicking and we are trying to push the stock out into the market, whatever little we have is being flitted away at these low levels and you will probably have a shortage coming in next year if this happens.Manisha: I just want to make a sense on how the global markets and Indian markets are right now, because the global markets have continued to gain up. There have been those reports from Brazil and the kind of demand China also seems to be getting while the Indian markets right now, seem slightly isolated because of the government moves and of course, the fear that the prices may run too much from here.A: India happens to be a part of Asia, which we seem to ignore. China is talking about a shortage, Indonesia is talking about a shortage, Thailand is talking about a shortage and India suddenly cannot say we are going to have a surplus because we have a different weather pattern to the rest of Asia. We should also be careful and try to hold our stocks. And right now what we are doing is just pushing the stocks out and probably we will get into a tougher situation in the coming year, which is a cycle, which happens every 10 years. We are in the cycle, we should recognise that the cycle is there.Manisha: Also, most of the banks and brokerages in the global markets have come out of a view that India will perhaps, import in the next season. How prepared is India for that and do you see that as a possibility?A: Right now, we are burning stocks at Rs 34 and we are going to be importing at Rs 42. So, it does not make sense. Today, you would be better off trying to have higher prices and conserve the stock so as to limit the imports that we should do next year. Again, we always do this. I have watched this segment now, this is the fifth cycle that I am seeing in 40 years and when you look at it, it is pretty much the same. We give incentives to export and we import the next year. We have done it not once, almost about three to four times in the last four decades.