Sugar decontrol to happen in phased manner: Simbhaoli Sugar

On Sept, 3 the Agricultural Minister made a formal presentation to the Prime Minister for sugar decontrol. This is the first time that an official step has been taken by the Minister.

In an interview with CNBC-TV18’s Managing Editor Udayan Mukherjee, GSC Rao, ED, Simbhaoli Sugar, speaks about the issue and gives his outlook going forward.

Here is a verbatim transcript of the exclusive interview with GSC Rao on CNBC-TV18.

Q: Is it realistic expectation, according to you, what was proposed by Sharad Pawar to the Prime Minister yesterday or do you think it’s one more of those events of talk of decontrol of which nothing will come?

A: We are optimistic that decontrol would happen. Things will take their own time, but there is definitely an interest in the industry from the Indian Sugar Mills Association as well as national federation.

The industry wants it and the ministry is also seriously pursuing it. We are hoping that definitely decontrol should happen, whatever time it takes it takes by deliberations, but definitely it’s a move which is serious.

Q: Would you expect the starting point of that to be scrapping off the levy quota?

A: I think three things are there. One, the farmers will be allowed to supply cane wherever they want, if they have better price and prompt pricing. That’s starting point. And then monthly release mechanism will be the second. Probably, the third one is the levy to be removed, the industry needs to be subsidised for levy. That will be removed. These are the three things.

Q: Do you think it’s realistically possible given the political sensitivity of sugar that we could achieve decontrol of these three steps by the end of this year?

A: Basically, the whole exercise is to benefit all the stakeholders, there is no political thing to that. The farmers will have more than happy, if they can supply wherever they want, given the conditions that they are forced to supply to a factory, which is not making cane payment and paying a right price, they are happy.

And industry will be able to liquidate its stocks as and when required to cane areas and other liabilities; bank liabilities. The levy is definitely a burden to the industry, the public distribution system (PDS) system can continue without burdening the sugar industry. Every rupee saved by the industry will be definitely passed on to the farmer. So, I do not see any negativity in the whole exercise.

Q: What is going on globally with sugar? Have demand supply situation changed a bit because raw sugar prices have gone up to almost 21 cents?

A: Demand-supply situation is that there is a surplus of 3.5 million tonne of sugar in the world; 167 is the consumption and 171 is expectation. The situation is that Brazil is producing more, India will be producing more; the two major countries.

The recent spurt can be attributed to the congestion in the south central Brazil for the export of raw sugar and that’s the reason why I think over a period the decongestion will happen. There was a problem of lot of ships waiting for the export and the spot demand is there and there is requirement in Pakistan. These are the things, which propelled prices, but it cannot be for a long-term. We expect the prices would get corrected.

Q: What about domestic realisations, where have they headed in the last one month?

A: Domestic realisations are definitely low and the sentiment of high production, between 22-25 million tonne expectation is there. There is a 14% increase in the cane area and because of the good rains yields should be good. So, the domestic prices are definitely on a lower side, less than the cost of production that is a cause of concern for the industry.

But with the export happening from India for the raw sugar under the advanced license scheme will help to stabilise prices. Price correction for the cane price may also happen; industry has paid very high cane price last year, this year, the correction may happen. So, overall, the situation is little bearish in Indian sugar industry, the domestic prices have to go up.

Q: What is the gap between realisations and cost now and give us actual numbers?

A: We are losing Rs 3-4 on cost of production because of the bearish tendency and high realises and other things. So, this gap has to be fulfilled.

source: moneycontrol