See sugar prices go up by Rs 0.50-1.00/kg: Triveni Engg

In an interview to CNBC-TV18, Tarun Sawhaney vice chairman & managing director, Triveni Engineering and Industries says with the festive season round the corner there is a hope of sugar prices increasing by 0.50 paisa to Re1 per kilo. According to Sawhaney woes for the sugar industry continue, more so with the cash flow for the industry being under pressure.However, going forward he is hopeful of the government linking sugar prices with cane prices.For the company per se, the write-downs in inventory have been substantial for the first quarter of FY15. The long-term and working capital debt as on June stood at around Rs 1200 crore out of which Rs 575 crore is long-term, says Sawhaney.

The company reported a subdued set of numbers for Q1 FY15.The industry has also requested the government to consider and impose the Rangarajan Formula for pricing, says Sawhaney. They have also requested the government to raise import duty on sugar from 15 percent to 40 percent, he added.

Below is the transcript of Tarun Sawhney's interview with Ekta Batra and Sumaira Abidi on CNBC-TV18.Ekta: Give us a word on your numbers; do you think that the net loss is going to get aggravated because of the situation in the sugar business and whether it could get worse in Uttar Pradesh (UP) especially in October on?A: We have reported Rs 5 crore loss on a consolidated basis for this quarter. However, our inventories of course have been written down quite substantially. Therefore, looking forward, I would imagine that with the holiday season around the corner, sugar prices may rise 50 paisa to Re 1 per kilogram, no more than that. That of course will have a positive impact.However, the situation is grim; the industry as a whole is in a terribly precarious situation and on the cash flows in the sugar industry are under extreme pressure.Sumaira: There is some bright spot this time around that your finance costs also are lower. So can you tell us what your current debt is standing at and your repayment plans as they are?A: As on June 30, long-term and working capital debt stood at approximately Rs 1,200 crore and out of that Rs 575 crore is long-term debt. Out of the long-term debt Rs 130 crore is the Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU) loan received from the central government which is not interest bearing. So, one must take that into account. Year-on-year, quarter-on-quarter there is substantial reduction because the total inventory that we are carrying has reduced, which has been an important factor in this reduction. Of course our borrowing rates which are just above 11 percent are also healthier.Ekta: Do you think that servicing the debt is going to become a problem in the coming quarters? Have you had conversations with the banks to apprise them of the situation in Uttar Pradesh and their response on the same?A: There is a PIL that has been filed at the Chief Justice’s bench in Allahabad High Court and the banks have impeded themselves in that case. The bank’s contention is that the stock of sugar belongs to them that is at least 85 percent is towards the working capital limit. The contention also is of course that the balanced amount of proceeds from the sale of sugar, from 15 percent has to go for servicing the principle and interest repayment on the long-term debt. Now there has been an interim order that has been issued by the Chief Justice of the Allahabad High Court. I am yet to receive a formal copy but between today and tomorrow we should be receiving the official copy of that order. That will make clear as to what the directions the court is giving and of course then it is up to the banks. The banks in terms of securing their lending from the sugar industry may consider approaching the Supreme Court etc but it is a wait and watch strategy. There is pressure and for the industry as a whole, it is a challenge because making those loan repayments etc is going to become increasingly tough if we do not see some relaxation in policy, and an increase in sugar pricing.Sumaira: Are you hopeful that there is going to be some breakthrough because so far all the back and forth has more or less led to a status quo between the various stakeholders in this sugar crisis, where does the situation currently stand at?A: One is always hopeful and always optimistic for our stakeholders, our farmers and our suppliers but the position is very grim. We made three-fold representations to the state government. One is that the state government had said that they would give us Rs 9 for this year’s cane price but we have not heard anything about that despite the committee having been formed.Second is that the state government has given Rs 59 per quintal support to its own mills and we are saying that in addition to those Rs 9, we should receive some more support for the industry.Third, is a request to the state government to implement the Rangarajan Committee formula. Now, I know it is highly contended but one has to remember that we have to find a long-term sustainable solution and Dr Rangarajan has put forth a very practical solution. One must remember that the solution that has been put forward is one where India and Uttar Pradesh (UP) in specific would be paying the highest amount of percentage as cane price, which means that for whatever sugar is sold at, we will be paying the highest cane price the world over.As far as the central government is concerned, only last week the industry association gave four-point request to the minister. The first of course was to increase import duty from 15 percent to 40 percent. Second was the SEFASU, the interest free loans which is in two parts, one was the new loans and the second was the extension of the period of the loan that was given earlier this year.The third is to impress upon the state governments to implement the Rangarajan committee formula.Forth is a more general point whereby to harness an environment where if sugar prices do increase, it is not that bad.