Domestic sugar production can further tighten in the next sugar year beginning October 2013, as Maharashtra will see another output drop. This augurs well for the industry that has seen losses in recent years. Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, shares his outlook and prospects for the sugar industry in an interaction with Ajay Modi. Edited excerpts:
There is a buzz that sugar output in Maharashtra will fall further in the next season beginning October 2013. Cooperative mills make the bulk of sugar in the state. What is your reading?
Sugar production in Maharashtra is projected to fall nearly 50 per cent to 6-6.5 million tonnes (mt) in the current season, dethroning the state from its number one position. The state’s sugar producing belt has seen a poor monsoon this year. The planting of seeds for harvest in the next season will be impacted due to the drop in water availability. At this stage, it is difficult to project the extent of decline but it could be significant.
What implications will a further output drop in Maharashtra have on national sugar availability. Will there be a need to import?
Imports might not be required, but next season’s total production (after a drop in Maharashtra) could be just sufficient to meet domestic consumption demand of 22-23 mt. The resulting situation will support sugar prices.
Is there a difference between the stands taken by cooperative federation and private millers with on the import duty for sugar?
No. We have represented to the government for an increase in duty on both white and raw sugar from 10 to 30 per cent to improve domestic sentiment. Isma (Indian Sugar Mills Association) is also seeking an increase in duty.
Considering that the total production could fall further in the next season, should the country export sugar?
Opening up (the industry) and giving permission to export sugar will improve domestic sentiment. India has an exportable surplus of 1.5 mt this season and exports can be undertaken whenever a viable opportunity arises.
What else can be done to improve domestic sentiment?
The current sugar sale price is below cost of production. Prices have been under pressure after the government announced a market sale quota of seven mt for four months beginning December. If this trend continues, it will be difficult for the industry to make timely payment to farmers. The government can look at creating a buffer stock of two mt and reimburse the industry with storage and interest cost. The seven mt quota for four months can be made for five months.
Are you hopeful of decontrol of the sugar sector after recommendations by the Rangarajan report?
As we understand, the government has already initiated the process. It is discussing the issues pertaining to removal of the levy system with state governments. Release mechanism period has been relaxed to four months and we have assurance from the government that it will move to a half yearly system. If the sector is even partially decontrolled (levy and release mechanism), new investments will happen. Other issues like a revenue-sharing formula for the sugarcane price can be implemented after all stakeholders come on board.
