The Rs 50 rise in Minimum Support Price (MSP) for paddy is not a concern for Kohinoor Foods. Speaking to CNBC-TV18, Satnam Arora, Managing Director, Kohinoor Foods, says the company’s major export product is basmati rice, with non-basmati products contributing only 7-8 percent to its revenues.
“This hike in MSP will make non-basmati rice expensive by USD 30, internationally,” he said
He says the less rainfall prediction by the Indian Meteorological Department (IMD) is not going to affect the company adversely as farmers in Punjab, UP and Haryana are competent enough to face a situation like that of less rains or drought. The overall production of rice will be perfect and basmati production will be 5-7 percent more than last year, Arora said.
The company’s prices will adjust internationally in the global market, despite the hike, as the prices were lucrative and competitive for its customers, he further added.Hailing the government's move to increase the MSP of paddy, Arora says: “Cost of farmers has gone up and we have to support our farmers.”
Below is the edited transcript of Satnam Arora’s interview with Mangalam Maloo and Reema Tendulkar on CNBC-TV18.
Mangalam: Do you see any impact in the proposed hike of about Rs 50 in paddy which comes up to about 3.5 percent?
A: This Rs 50 is good for the farmer but business wise the price of rice will go up. We do a little non-basmati rice so it will affect our pricing in the international market. We will be expensive by almost USD 30 and in case international price can afford it then we will definitely ship it. Whereas on Kohinoor it does not have a large impact because our non-basmati exports are very les compared to basmati.
Reema: Can you give us the percentage, the contribution on non-basmati to your revenues?
A: Non – basmati is almost 7-8 percent in comparison to our basmati business.
Mangalam: We were also taking about rains, the MET department has indicated that there is an 88 percent probability of lesser rains but in the first 5-6 days of the monsoon it has said that there has been 13 percent above normal so what do you make of the rains and will there be an impact on the crops of basmati rice this year?
A: In my view it is not going to affect adversely to the basmati farming because mostly all the farmers in Punjab, UP, Haryana they have their other arrangements also so in case of any short rain basmati will not be affected because they are quite competent to face all this droughts. The rain so far looks normal in our area. In our view it will not affect adversely to our basmati farm.
Reema: Generally not just basmati but the productions of rice this year how much will it be and you don’t expect any shortage or short fall because of the monsoon?
A: In my view the overall production of rice will be perfect and even in basmati rice, it may grow by 5-7 percent but it will not be down in comparison to the last year.
Reema: So last year basmati production you said was down but this year you are expecting it to be 5-7 percent?
A: More than last year and the other thing is we expect much bigger business in basmati this year also because prices are very competitive and it is very attractive and lucrative to our customers and they will definitely buy larger quantities this year comparison to last year.
Mangalam: Were we to see a hike or a rise in Basmati rice prices will go be able to pass it on to your customers going forward or perhaps you will take a hit on your margins then?
A: Basmati rice price, it is every day game. Every day we buy and every day we sell and the customer is aware of it. So, the rice is sold only on the regular prices; so it is a regular business nobody will take the hit neither the customers nor Kohinoor Foods.
Why should be take a hit in case our customer is ready to pay more price. Moreover in branding we always charge some better margins on it so that it is good for organisation.
Reema: The MSP price hike that we are picking up from our sources at 3.7 percent would that be in line with what the market or industry was expecting?
A: The costs of the farmers have also gone up and what the government has done is very good. We have to support our farmers also. In international market the prices will also jump so it will adjust into the market pricing so adversely it is not going to affect our rice industry.
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