The Indian sugar industry is at a crossroad. The government is closely looking at the demand for decontrol. Jonathan Kingsman, chairman of Switzerland-based Kingsman, the world’s top sugar consultancy and brokerage firm, speaks to Ajay Modi on decontrol and the global outlook. Excerpts:
How do you see the sugar scenario building from here for the Indian industry?
In the Indian context, it will depend on the shape decontrol takes. A win-win situation for the Indian market would be the end of the release mechanism, followed by the end of the levy system and still having a fair and remunerative price to guarantee a minimum income to the farmer in bad years. In Brazil, the industry took off after liberalisation and I can imagine the same in India if it is freed of unnecessary controls.
In a way you are in favour of removal of controls?
India can do it gradually and not rush in. The first step could be an end to the release mechanism and then with the levy.
Will decontrol lead to foreign investment in sugar business?
The big giants are keen to invest in India and it is inevitable that they will once decontrol happens. There is a keen interest globally in acquiring production assets in all commodities.
How do you see the next sugar season for India in terms of output?
Well, it is very difficult to predict. Our number runs in the range of 23 to 27 million tonnes, and it may end around 25 million tonnes. The monsoon has been good and yield should also be good.
Do you see India re-entering the global export market?
Yes. We are expecting the world market to have a surplus of 3.3 million tonnes next year. But because we had two years of deficit, we expect a lot of countries to re-stock. Import demand is going to be higher than export availability in the first half of next year. There is a need for Indian sugar to be exported. In the past, Indian export was seen as dumping by the world market. But the world market now needs Indian sugar. I expect one million tonnes of export from India. This is excluding the export under advance licence scheme.
Renuka Sugars recently acquired two sugar companies in Brazil. Is it a good move by Indian companies to go out and acquire assets in Brazil or some other country?
Yes, it is. India has seasonality and it produces sugar between November-December and April. Brazil’s sugar season is May-December. So, the two dovetails well. It also helps spreading the risk of bad weather. If a company can spread itself over two-three geographies, I think it is a good idea. Above all, India is short of land and short of water. So, if an Indian company wishes to expand, it can venture out.
Which are the other countries where Indian companies can acquire assets?
The geography is same in Africa, especially countries like Mozambique and Ethiopia.
More From This Section
India is the world’s biggest sugar consumer. But we fail to dictate global prices. When we import, we do it at high prices but while importing we need to sell at discounted prices. What is your view on this?
India does dictate prices. When India sets out to import sugar, global prices double. When it does not import, world prices halve. I think it is a part of India’s glorious complexity and democracy. Indian imports happen noisily whereas the Chinese, who are going to be big importers, do things quietly when they export or import. They are invisible in world market even when they buy or sell.
What is your outlook on global sugar prices?
We expect world prices to remain steady. We are waiting to see how the harvest develops in Russia, Brazil and India. If the weather turns bad, prices could rise and vice-versa.
