High cane prices badly affecting sugar mills

TRADE TALK: Ravi Gupta

The 2006-07 sugar season is underway and the long-standing ban on sugar exports has recently been withdrawn. At this juncture, Ravi Gupta, president of Bajaj Hindusthan, talks to Ajay Modi about the sugar business.

How will the high sugarcane price in Uttar Pradesh this season (Rs 125-130, Rs 10 a quintal increase over last year) affect sugar companies?

Almost 80 per cent of the cost of sugar is cane price and if that goes up, it affects the industry adversely. Higher cane prices in UP makes doing business there incompetitive. In other countries, there is no system of differential cane pricing.

Sugar price this season is significantly low. How would this affect payments to sugarcane growers?

If sugar prices continue to be at these levels, mills will face difficulty in clearing cane payments towards the end of the crushing period.

How will the delay in payment affect cane acreage?

If cane arrears pile up, sugarcane planting will be affected in states where planting has not started and the acreage may fall.

Being the country's largest producer, do you intend exporting sugar this year?

Yes, we are looking at exporting sugar. For us, the initial destinations would be Bangladesh, Sri Lanka and Indonesia. A gap of 6 million tonne has been created in international sugar market owing to the exit of the European Union and India has not been able to tap it.

Sugar being a regulated sector, what should be the government's role towards the industry?

Government should focus on making the industry globally competitive and finding a long-term solution to higher cane prices.

What should be the solution for the surplus stock that India will have this season?

Globally, Indian sugar is not competitive and the only way out is exports. But government needs to aid the industry with subsidy for exports.