September is the right time to decontrol sugar sector

The last three years have been eventful for the Indian sugar industry as both prices and production oscillated from record highs to abysmal lows. In an interview with FE’s Shishir Behera , GSC Rao, president of Sugar Technologists’ Association of India (STAI), and chief executive officer of Simbhaoli Sugars, discussed some of the problems that the industry faces. Excerpts:

What is your estimate of Indian and global sugar production in the next season?

We have a very good sugarcane crop this year. The Indian Metrological Department (IMD) has also predicted a near-normal monsoon for this year and, hopefully, sugarcane acreage will be higher as farmers got better returns. I think sugar production during the next season (2010-2011) will be around 24-25 million tonne. Global production is also expected to be good though there will be some deficit. But, Brazil is doing well and so is India .

Sugar prices have corrected a lot after reaching an all-time high of Rs 50 per kg few months back. Where do you see prices in the next few months?

Prices of sugar were not high. It was at the right place given the high cane prices. It is always a consequence of sugarcane price. If you do not pay well to farmers, they won’t plant cane. So, the deficit will be higher, leading to higher sugar price. Sugar at around Rs 30-35 per kg is good at this time. At present, ex-factory price in Maharashtra is Rs 20-25 a kg, and in north India , it is around Rs 28. It has just firmed up because of some policy changes by the government. If it is less than Rs 32, farmers definitely will be getting less price for cane next year.

What is your view on decontrol of sugar? Is it the right time?

The decontrol or de-regularisation of the sugar industry is a long-pending demand of the sugar industry and it is definitely going to help farmers because the cyclicality will be reduced. If there is deficit, the industry should be allowed to import raw white sugar at zero import duty and process in dividend in the market. During surplus, we should be in a position to export.

I will not call it “this is the right time”. I think September and October (just ahead the coming season) is the right time for decontrolling the sugar industry. By that time government will have some idea of the 2010-2011 crop and impact of the monsoon season.

There is a demand from some quarters to roll back steps initiated by the government to control retail prices as now sugar prices have come down considerably. How do you see it?

Whatever was done was to encourage import of raw sugar to ensure adequate supplies in the market. Now, that the sugar production in the country is expected to rise to 18 million tonne from earlier estimate of 15 million tonne, the government should put a ban on white sugar import as we have adequate sugar, though not surplus....

source: financialexpress