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INTERVIEW: Sugar body chief sees bumper output of 33 mln tn 2020-21

Tuesday, Jan 14

 

By Preeti Bhagat and S. Anirudh Iyer

 

NEW DELHI – India's sugar output is likely to rebound to a record high of 33 mln tn in 2020-21 (Oct-Sep), as bountiful rains this season have helped farmers in Maharashtra and Karnataka expand cane acreage, Uttar Pradesh Sugar Mills Association President C.B. Patodia said.

 

This year, India's sugar output is seen falling 18.5% to 26.85 mln tn, as last year's drought led to lower cane acreage and hit the standing cane crop in Maharashtra and Karnataka, among the key sugar producers in the country.

 

However, a revival is seen in cane output in these two states due to a good monsoon and ample water in reservoirs this year. In Maharashtra, output is likely to rise to 9-10 mln tn and in Karnataka, it is seen increasing over 5 mln tn, Patodia told Cogencis in an interview. 

 

In 2019-20, the two states are likely to produce 5.5 mln tn and 3.2 mln tn sugar, respectively.

 

A rebound in India's sugar output next season could push supplies to a record high of over 42 mln tn, making the government's help imperative for the industry.

 

Following are edited excerpts from the interview:

 

Q. What is your view on India's sugar production in 2020-21?

A. The country may produce 33 mln tn next year because the area under cane has increased sharply in Maharashtra and Karnataka. Reservoirs are full of water due to an above-normal southwest monsoon. Maharashtra will see excessive cane production as there is no problem of water this time. The sugarcane sown by farmers in early June and October will give very good yield next season.

 

Q. What about sugar production in Uttar Pradesh next season?

A. Uttar Pradesh will again produce 12 mln tn next year because monsoon has been good and there is no reason for a fall.

 

Q. How are mills in Uttar Pradesh performing on the ethanol front?

A. The state is the largest supplier of ethanol. This time, factories have offered about 954 mln ltr in the first round and contracts have been signed for 875 mln ltr. In the second and third tenders, Uttar Pradesh mills will again offer their quantities.

 

Q. Is ethanol the only solution to curb oversupply? 

A. Yes, by using B-heavy molasses, sugar inventory will reduce and once that happens, the recovery of alcohol will be higher and farmers will get timely cane payments. In the case of sugar, we have to store it in godowns, which incurs holding cost. But for ethanol, within four-five days of supplying, you will get payments.

 

Q. What is the industry in Uttar Pradesh seeking from the government to deal with excess supplies?

A. The money mills pay farmers to transport cane in Uttar Pradesh is very low, and should be increased. Even though only 45% sugarcane is taken from out-centres, our expenses incurred for transport are much higher. We have requested the state government to not increase the cane price and to adopt the revenue-sharing formula. Second, reservation of 18% of molasses for country liquor manufacturers should be done away with. Third, the price of bagasse uused to calculate power prices has been reduced. We have requested the chief minister and other officers to reconsider our case. Our bagasse price is more than 2,000 rupees per tn at the moment, and they calculate power price taking into account the bagasse price at only 1,000 rupees. For the survival of the industry, they have to make it viable. If the industry isn't viable, one by one all mills will close. They have to think as to how the industry will survive.

 

Q. The government is heavily involved in the functioning of the sugar industry, right from deciding how much sugar each mill should sell every month to determining the commodity's price. Will this ever change?

A. We have all types of state and central government controls. Until and unless they remove such control, we can't stand on our own feet. You know that timely payment needs to be made to farmers. On one hand, we have huge inventory of sugar at warehouses, and on the other hand, we are supposed to make payments to farmers within 14 days. And, production will again soar in some months. This is a vicious cycle. If the government gives us a free hand, we will not make any request to the government to support us.

 

The industry will improve. Those who are efficient will survive, those who are not will die. But in the long term, it is in the benefit of both farmers and millers. For one or two years, the industry may face difficult times, but in the long term, both farmers and the industry will gain.

 

Q. Mills in the west have been demanding an increase in the minimum selling price. Do you see something like this on the Centre's agenda?

A. No. The cost of production in Uttar Pradesh is around 35 rupees per kg for sugar. Last year, our chief minister had sent a letter to the Centre to increase the minimum selling price from 31 to 34 rupees, but they did not agree. This time, due to a short season in Maharashtra, their cost of production has increased and that's why all political parties in Maharashtra are exerting pressure on the central government to increase the price. On one side, they have consumers and on the other, they have farmers. If the selling price is increased, consumers would be affected.

 

Q. Lately, shares of large sugar companies have been rising significantly. What is your view on this?

A. People who work in the share market see low sugar production. They assume it to be 25-26 mln tn. Requirement of sugar in the country is also 25 mln tn. We have been holding inventory of 14.5 mln tn from last year, of which 5-6 mln tn will be exported, so the inventory will fall to 9 mln tn. On that basis, they are assuming that sugar prices will further improve. If sugar prices improve, the industry in Uttar Pradesh and Bihar, among others, would benefit, as these states have more sugar to sell.  End

 

Edited by Shirsha Thakur

 

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This copy was first published on the Cogencis WorkStation

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