Abinash Verma, Director General of ISMA, said that the yield in Maharashtra and Karnataka had dropped by more than 40 percent.
India's sugar deficit has risen to 18.54 percent in the space of a fortnight from about 15 percent in the middle of February, according to the industry body Indian Sugar Mills Association (ISMA).
"Between October 1, 2016 and February 28, 2017, sugar mills have produced 162.45 lakh tonnes of sugar, as against 199.43 lakh tonnes produced last year in the corresponding period," ISMA said. "As on February 28, 2017, 257 sugar mills are continuing their crushing operations, whereas in 2015-16, 390 mills were in operation on the same date."'
Abinash Verma, Director General of ISMA, said that the yield in Maharashtra and Karnataka had dropped by more 40 percent following a drought in the west and in the south. He said that there will be a review of the numbers on Monday.
Verma said he does not expect production to be below 200 lakh tonnes and that a global surplus is expected next year.
SP Tulsian of sptulsian.com said that sugar prices may rise by a few rupees in the next three to four months, adding that sugar is being sold at a premium in Karnataka and Maharashtra.
He said that the government would take a call on imports after the Uttar Pradesh election results on March 11.
Below is the verbatim transcript of SP Tulsian & Abinash Verma's interview to Sumaira Abidi and Navin Shetty.
Sumaira: How should this cycle now be played? How would you look at the sugar stocks now?
Tulsian: With the production having released by Indian Sugar Mills Association (ISMA) today, the 162.5 lakh tonne, it is very essential to understand the overall situation that how it will pan out till end of season. If I just take a guess that 162.5 lakh tonne is the production which we have seen, I am expecting Uttar Pradesh because now Maharashtra and Karnataka have now largely closed; all the mills have stopped crushing. So, UP will be producing maybe about 18 lakh tonne maximum maybe till end or maybe middle of April by which all the mills in UP also will close - that will add to about 180 lakh tonne.
If you take the second season of Tamil Nadu, I do not think they will produce more than 4 lakh tonne. So, maybe if you take a ballpark figure of about 7-8 lakh tonne on all-India, maybe some Tamil Nadu and balancing figure and all that, the all-India sugar production is surely going to be seen at 190 lakh tonne or sub-190 lakh tonne. Now, ISMA having lowered the production target in their previous meeting, from 234 lakh to 213 lakh tonne, so it needs to be seen that what will be the projection now ISMA will be giving for the estimated production of sugar for this season. So, the situation is quite precarious.
Sumaira: To begin with, if you can tell us what the projection for the full year will be. We have got your number till October, 1 which is about 162 lakh tonne. What will you hope to wrap up the year with?
Verma: As Mr Tulsian mentioned, we will do it again. We will review our numbers on Monday. We have our committee meeting. We just don't throw numbers. I do not have the power to do it alone. We do it in a meeting attended by all members across the country. Yes, we had estimated 213 lakh tonne of production at the end of January and suddenly we see that the yields from Maharashtra and Karnataka had fallen drastically by almost 40 percent and that is why, we may have to review the numbers on Monday.
But I cannot give numbers, I certainly do not agree to the numbers being suggested by Mr Tulsian. He probably has some numbers, I do not know from where, but our members in UP do suggest that it is going to be higher than what he is suggesting. But I do not want to get into that debate today on television without really having discussed with my members on Monday.
Navin: We have been seeing some kind of a slide as the yields have been falling, that is what Mr Verma has also told. Now, with the production falling, how do you see the increase in prices? How do you see prices going ahead majorly in the states of Maharashtra and UP as such?
Tulsian: First touching on Mr Verma's point, I fully agree and I respect his views, but this is just 18 lakh tonne which I have said from here on till middle of April only from UP, it is just guesswork. It could be 25 lakh, it could be 24 lakh tonne, but I am adding about 5 lakh tonne because I am not expecting 3-4 lakh tonne from Tamil Nadu in the second season. So, even if I take 25 lakh tonne from UP which is again on the very high side and maybe about 3-4 lakh tonne, I will be having about 28-30 lakh tonne and that also adds to about 190 lakh tonne. So, my ballpark estimate production for the country is going to be closer to about 190 lakh tonne, take 2 lakh tonne plus or minus.
Coming on Maharashtra and Karnataka, the production has been seen lower by about 42 percent in Maharashtra. It fell to 41 lakh tonne for Maharashtra and Karnataka production fell by 43 percent to 20.5 lakh tonne. And now, the situation is prevailing on the ground is that south market, which always used to rule lower by about a couple of rupees per kg, is now seeing sugar getting sold at a premium or maybe virtually at the same price at which it is being sold in UP.
So, it is very difficult to take a price call but because the government, after the UP elections, will be taking a call on the import and now, if you take an import parity price, still it is quite high with zero import duty also, higher than the commodity getting sold in India. So, I do not think that even with zero import duty things will work - that can spoil the sentiments here on the sugar stock.
I am not very happy with the sugar prices rising but I am giving you the ground situation that prices can further rise by about a couple of rupees in the next 3-4 months because we will be having the reality on the ground by April 15 of the pan-India. On April 15, the production, which ISMA will be releasing probably on April 17 just add 5 lakh tonne at that point of time.
So, I agree with Mr Verma's view. This is just a ballpark estimation which I have collated from ground, from the people in UP and have taken 18 lakh tonne which could be 23-25 lakh tonne as well. But overall production is likely to be 190 lakh tonne.
Navin: We have been talking to other sugar companies also who have been estimating that going ahead sales might be picking up as such. So, again, I would like to toss the same question to you also. Like how Mr Tulsian said that prices, he cannot estimate, but can you give us a ballpark figure on what is your estimation on the price sliding, especially in southern states, which as he sees, the premium, the gap, the spread has been lowered in the last few months?
Verma: I am not an expert on the price situation and I think Mr Tulsian has suggested something. I do not know whether I should agree with that or not to agree with that. I can only suggest and mention that the fundamentals are there on the table. The market knows the best and the market is seeing that the production – I do not think that the production should be below 200 lakh tonne. We will have to do estimation later on.
Next year's production numbers will start coming in from July and the world production next year seems to be higher than what we are expecting. There is a global surplus expected next year. Brazilian sugar production should be in the market from April. So, we should consider all these aspects when we talk about these domestic sugar prices. I am not an expert on the market and sugar prices, so I cannot suggest how the sugar prices are going to move from here.