Sugar stocks were buzzing in trade today as domestic prices rose on back of lower production. Sugar prices are up by Re 1 per kg to 28.50 per kg in north India. Speaking to CNBC-TV18, M Manickam, executive VC, Sakthi Sugars says the sugar production may fall this year given that farmers are not getting paid well and are diverting the sugarcane to gur. Also, the season is likely to end sooner due to hot conditions and so, we may produce south of 23 million tonne, he adds.
Below is the interview of M Manickam with Sumaira Abidi and Nigel D'Souza on CNBC-TV18.
Sumaira: What is your assessment as far as this year's sugar production is concerned? A lot of reports are suggesting that production may actually fall to years low this time around?
A: It should, because if you look at the Indian Sugar Mills Association’s (ISMA) statements on Tuesday, the arrears are around Rs 12,000 crore, the farmers are not getting paid. What you would see is the farmer diverting the crop to gur where you would get initial payment even at a discounted price. So, we are looking at huge diversion that is likely to come and probably the season will also end little sooner due to hot conditions. I don’t expect we will do 25 million tonne that we did last year. Possibly we will be doing south of 23 million tonne.
Nigel: What is the current cost of production? What are the prevailing rates in the markets? I am told that sugar prices have gone higher in the last couple of days.
A: Cost of production is about Rs 34 and we are still around Rs 27-28. We have about Rs 6 to catch up. That is going to take a while.
Sumaira: Last week the Cabinet allowed over Rs 3000 per tonne subsidy on the export of raw sugar. What impact can a company like yours expect on account of that?
A: Nothing for us because this is effective only for Maharashtra mills because the cost of production in Maharashtra is the lowest in country. With Rs 3500 subsidy, they would be in a position to export raw sugar out of the country. We will have reflected benefit of the inventory going down in the country and subsequently the prices going up. Directly, I don’t see any implication for the southern mills.
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