The Indian Sugar Mills Association is organising a workshop on the sugarcane pricing policy in India.
CNBC-TV18's Manisha Gupta was in conversation with experts from the industry.
Panelists included Tarun Sawhney, President ISMA; Ajay Jakhar, Chairman, Bharat Kishak Samaj; Vivek Saraogi, MD, Balrampur Chini Mills and Sabyasachi Mazumdar, Senior VP, ICRA.
Excerpts from the interview.
Sawhney of ISMA said the country shouldn't be too dependent on Maharashtra and Karnataka (two sugar producing states), which determine sugar prices.
"The concept of swing states is not palatable," he said. The need of the hour is a national sugar policy.
The sugar industry has seen a volatile 3-4 years, with prices rising on trader stocking. Recently, the central government had imposed stock limits on various states to curb price hikes.
Saraogi, representing the suppliers, said that the sugar factory is like a car, whereas the engine is the farmer.
Mazumdar said sugar has been a pain point for a long time. But ICRA's latest report, he said, is positive on the sector.
Below is the verbatim transcript of Tarun Sawhney, Vivek Saraogi & Sabyasachi Mazumdar’s interview with Manisha Gupta on CNBC-TV18.
Q: What are your thoughts on National Sugarcane Pricing Policy?
Sawhney: If we talk about National Sugarcane Pricing Policy I am not advocating another board, another committee. I am very far from that. I think that the example and I said so in my opening remarks very progressive examples that have been taken by the state governments of Maharashtra and of Karnataka are a lesson for us. They are a lesson for us; I am not saying that I have the magic formula. Vivek Saraogi also commented, the Rangarajan Committee formula is 75 percent. Now we have a government in place to decide what is the right formula? What is the right implementable formula? However, the point is that we need one formula for the country because why is it that we should have massive variations across the country. We will always have these fundamental problems.
In today’s scenario, let me be very candid with you, the only way sugar prices could have gone up is if production in Maharashtra came down. Now why is that what the country has to wait for or for say let Northern Karnataka for the fortunes of the sugar industry to improve because those are the swing states? The concept of having swing states, the concept of having big vacillations is not palatable. In an environment where financial burdens on industries and we are reading in the papers what happens to people who are defaulters etc. The measures that are put on corporate and responsible corporate if they default are so stringent well then we have to look much broader.
We have to step back and this is what I am trying to say that we need to find new solution and a national sugarcane pricing policy is one such solution with caveats a framers interest is very basic cost, must always be protected.
Q: Clearly, the last couple of years have been very difficult as we have been reporting as well. How would you take it all?
Obviously, everybody here has a different mindset, point of view. How do we put it together so that everybody in the chain can go out participate and grow?
Saraogi: If we heard between the lines of all of us, he message is the same. Ajayji said on the mic that I am happy that you said that when prices go up, you will give more. He talks of a percentage, indirectly. You said that the prices should be such that mills and farmers, both stay roughly the same. Tarun spoke of that and in the last line he said that the government intervened when there is a bare minimum protection required. So, are we all not saying the same thing?
Sugar factory is like a car. The engine is the farmer, but banker is probably the oil in it and the other expensive, you have to buy a tyre, you have to replace it. So, without an engine, it is impossible to run. So, let us understand and recognise that, we are not on two sides.
Q: How many times have you come out with a report saying that very volatile sugar companies, I don’t know how much time have you said over buy or stuff like that, it has been a very pain point for last couple of years and more?
Mazumdar: We used to write it as very volatile but for the last three to four years it is uniformly negative. We come out with quarterly notes on the sugar sector and we don’t talk about buy or sell because we are not allowed to do that.
Q: When you sit here and listen to all of them what is your sense now? Is it any better?
Mazumdar: It is not any better. After three years I think we have come out with a quarterly release which is somewhat more optimistic about the sugar industry. The way we look at it is, traditionally in India there has been two years cycle, typically two good years followed by two bad years and while talking about good years it is about sugar prices and typically that does flow down to the sugar companies balance sheet although the farmers also get some upside, either the cane price goes up or there is some profit sharing formally or informally between mills and the farmers. Of course that cycle has been disturbed for the last three to four years for various factors. So, unless there is that formula based approach I think that volatility will remain.