'Policy on cane prices, export quota to help sugar prices'

The likely decision by the government on cane prices and compulsory export quota for sugar would help sugar prices to move upwards is the word coming in from Narendra Murkumbi, Vice Chairman and Managing Director, Shree Renuka SugarsHe expects the government decision on cane prices this month.Currently, there is around 3 million tonnes of excess stock in the country and a decision on exports would be a big relief to the companies. Moreover, with most analysts believing that 2016 is going to be a low sugar output year according to analyst, sugar prices could see an uptick, believes ….World sugar prices are up from the five year bottom they had made in July, says … Domestic sugar prices have also improved by 20 percent, he adds.Below is the verbatim transcript of Narendra Murkumbi’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Sugar stocks have been surging and we are told that one reason is the rise in global raw sugar prices. Have you seen a sharp up swing? A: World prices are up 50 percent from their bottom which they made, five year low that they made in July this year. However, I think what is happening now is probably hopes of a correlation between that and the domestic market. Latha: That is what I was coming to, is there a correlation between global and domestic sugar prices?A: It depends on policy. I think we have about 3 million tonne of excess stocks in the country. The current crop is now lower than last year so it will be kind of little more than domestic demand. We have an overhang of about 3 million tonne of stocks; it is expected that policy moves to encourage export of that will be announced shortly and I think the current optimism is based on that. Without that the path for recovery of domestic prices would be longer. We are waiting for a decision and we hope the government will take a decision. We expect the government to take a decision this month.Sonia: What kind of decisions are you expecting from the government now?A: It has been widely discussed in the press already. There is we believe a proposal on assisting on the cane price to a certain extent and there is already been a compulsory export quota which has been notified. I think the combination of the two would probably get rid of the surplus sugar in the domestic market. The world market seems strong enough to absorb that export and then the domestic prices should rise to levels at which we would have positive margins. As of today still we do not have a positive margin on production. Sonia: Has there been any improvement in domestic sugar prices lately? A: Yes in the same period domestic prices have improved by about 20 percent. Latha: Without the policy help how will sugar prices trend the domestic market? A: I think it is still upwards but not immediately. We have a season starting so prices would be soft so because people would have a lot of sugar to sell, a lot of cane payment to make in the next four months between November and March. Eventually I think if prices remain at these levels it is possible that prices will inch up. 2016 seems to be a deficit year in the world market, all respected analysts in the sugar market agree on that and prices, the futures market is already signaling that kind of change in the fundamentals. However, policy help would actually accelerate this and enable people to make a positive margin right from the beginning of this season. We have an overhang of about Rs 7,000 crore of cane payment from last year, we have another Rs 60,000 crore that the industry has to pay for cane in the coming four months. So, that is where the priority is in terms of assisting the industry. Latha: How quickly are you expecting these decisions, these export and cane price decisions from the government?A: Personally I expect a decision this month. Beyond that finally it is a call of the government.