Don't see sugar prices rising from here: Triveni Eng

Prices of sugar have peaked and may not rise too much from current levels, Dhruv Sawhaney, CMD of Triveni Engineering, said.

In an interview to CNBC-TV18, Sawhaney said even if the government hikes the levy quota to 20%, the remaining 80% should be entirly de-controlled.

Q: What we hear is the levy quota will probably be at 20% and the price will be at about Rs 22 per kg. Is that what the industry has been hearing as well?

A: Correct. We have had some meeting with the food minister, number of meetings and we want to pitch in and help during the festival season and also for the next year. There is going to be a deficit not as much as some people in the press say, maybe about six million tonne but the industry is covered half of this contract internationally already. So while the levy might go from 10 to 20% what we are hoping is that for the balance sugar, 80% is decontrolled, because this is the only way that we can actually compete with gur and khandsari. Today in India there maybe a shortage of sugar but there is no shortage of sugarcane. If we produced all the sugarcane in sugar we will have more than enough for consumption. What’s happening is, if sugarcane which should come to the sugar factory is being used by the gur manufacturers for elicit distillation so that is the focus.

I think now prices have sorted of peaked so I do not think they are going to go up very much more.

Q: What is the sense you got from the government, are they saying that as long as you give us 20% on the levy and at the price of Rs 22 you can do whatever you want with the rest, if that happens what would an average realization on current prices plus levy be for a company like yours on an average?

A: Government has not given a reply at all and neither have they committed on this Rs 22. What they are saying is that the levy price will follow the court order of being based on SAP which for us in Uttar Pradesh where we have an SAP is fine. We wanted the levy prices to be based on the statutory price that is declared by the UP government so that will be good. It will also increase the levy price for last year as per the court order which would be good for companies like us because we will be getting this what we have been fighting in the courts for upto now. The balance sugar will not be very much more if there is control on gur and khandsari because if their prices today are some 15-20% higher than sugar so I really do not feel that the balance of sugar will be such that it is going to have any further spurt in prices. What we want to make sure is that prices are around this level so that cane prices are reasonable and that we feel that Rs 180-190 would be the cane price for next year. So with that I think we should have a good year.

The monsoon has picked up in the last week-ten days in Western UP and other parts of UP. Yields are better than last year so while there is going to be shortage for us I think we will have same production as last year if not slightly more.

Q: Where are prices now and what gives you the confidence that prices may have peaked in India given the fact that sugar is hitting newer and newer highs globally?

A: The global situation is a little different. Brazil has had excess rain so there sugar production has come down a little bit in the last fortnight of August. And while that is so certain countries are also deficit in sugar. Pakistan, Mexico, Egypt they are all importing sugar now than they were more than the last year so that is keeping up demand. World prices are not going to dip for sometime. The future for the world price is going up slightly upto March and then starts dipping from around July 2010. So internationally the prices are peaking a little bit more but domestically because we have covered atleast 50% of the deficit for next year we do not feel that there should be any spurt in prices.

I know we have this festival season that is why we have come forward and government is taking an extra levy so I do not think right now we should be too worried about prices going very much higher. We need to have an adequate sugar price so that the farmer gets the price which allows him to supply cane to the sugar factory. If we don’t do that then the production which is going to be 17 or can even go up a little higher can come down and that is not going to help anyone. So that is the real thing today that with proper sugar and cane pricing atleast a million more tonne of cane that has already sown can be converted into sugar.

Q: When do you expect to hear a final word both the levy quota will be and the price might be because the market fears that the quota may actually be as high as 30%?

A: Yes, we are also waiting for this. I believe they have to get clearance from the election commission which they might have got now and this is a cabinet matter. But I think it should be decided in a week. The government has said that for the last year the levy prices will be announced in the next few days because that announcement we expect very shortly which should be a substantial imperilment over the price declared, the provisional price declared. In our case it will probably go up from Rs 13 to Rs 18, Rs17-18 that is for last year levy price. For next year levy price as I said this is going to be based on the SAP which is going to be declared, it has not been declared as yet.

So the pricing I am not too sure whether the government may actually give a price of Rs 22 for next year, they will give a price for last year that is 2008-2009 but they will give a methodology of how they are going to announce levy prices. The old system which we were fighting against will not be there now as the government has said in court. So if it is based on the actual cane price or the stated wise price the sugar industry is not subsidizing the open market sugar. That will be a very-very encouraging thing for all sugar factories such as ours.

Source:moneycontrol