After two years of sugar surplus that brought down prices in India, expect a deficit of 5-7 million tonnes next year, says Narendra Murkumbi, Co-founder, Vice Chairman and Managing Director Of Shree Renuka Sugars . Abinash Verma, DG, ISMA, is of the opinion that there is enough sugar in the country. He says a surplus of 7.3 million tonnes will be carried forward to the next year and with an expectation of around 23 million tonnes output next year, there will be a total of around 30 million tonnes of sugar stock in the country. India's consumption is going to be around 26 million tonnes in 2017, he says. The demand for now is on par with the supply in the country, says Verma. This has brought the sugar price to around Rs 34-35 per kg. With production costs at Rs 33 per KG, Verma feels that sugar companies are finally getting good margins on their output. Thus, speculators are heavily long on sugar, and markets have also factored a deficit in supply. The government has come out with some measures to impose stock limit even as sugar mills deny allegations of hoarding. But Vivek Saraogi, Managing Director of Balrampur Chini Mills , says that 80 percent of India's sugar mills at this time of the year won't have much surplus. Only 15-20 percent would have stock above 37 percent of output. And , Vivek adds that with the festive season right around the corner, selling the surplus will not be a problem as demand may go up. Below is the verbatim transcript of Abinash Verma, Vivek Saraogi, and Narendra Murkumbi’s interview to Manisha Gupta on CNBC-TV18. Q: What is your sense on sugar? We have seen huge speculative moves in the global markets but the Indian markets, where do you see the supplies, output and demand going ahead? Verma: I think we have enough sugar in the country. We should be closing this season with about 7.3 million tonne. Next year we have already said that we will be producing about 23.3 million tonne which takes us to almost about 30.5 million tonne against a consumption requirement of 26 million tonne next year. So, we have enough sugar. On one side the fundamentals are very clear that there is enough sugar. However, in the previous two to three years, we had surplus sugar, we didn’t know what to do with it and that was actually pushing down the prices. Now the demand and supply position is matching each other and therefore the sugar prices which had fallen last year to the lowest in the last six years, has crawled up and it is just above our cost of production by Rs 1-1.50. If you ask me, the current sugar prices are reasonable, fair and justified for the sugar industry, the cost of production all India level I would say is about Rs 33, we are getting an average of about Rs 34.5-35 across the country which is just about enough margin to ensure that we pay enough price to the farmers as well as repay our bank loans. Q: What is your sense about the latest measures that have come in from government, we had it on the stockists earlier, now the mills also are under radar and the next two months of course there is a limit now for you? Verma: After we heard the tweet from the honorable Minister, Ram Vilas Paswan, we did a little research on our office to check whether many sugar mills are actually holding more than 37 percent or would be holding more than 37 percent at the end of September. As per our understanding and calculation, we found out that there will be about 50-60 sugar mills who may be beyond that 37 percent if they don’t sell enough sugar in the next 30 days. Therefore, it is just about 10 percent of the total industry or the 12 percent of the total industry which can be said to be at fault to the government thinking; that means they are holding more than what government would have wanted them to hold. That means about 90 percent of the industry has sold enough sugar, enough to feed the market. There has not been any shortage in the market because of which the sugar prices have been flat in the last four to five months. Q: Two months stock limit, what’s the impact of that do you see on mills and how much more sugars do you see coming in the open market because of this? Saraogi: I am not very against what the government has done (a) it is for two months as very expressly worded in the circular that it is for two months. Secondly, the percentage is fixed. Many mills like for example my own mill I don’t even have half that sugar at the end of October with the government as saying and I would believe that that is a case with 80 percent mills. Yes, there are some 20 percent, 15 percent mills who would vide this circular would be require to sell some sugar etc. The festival months is coming up and that is the peak consumption month, so I think that little bit of excess supply which this new notification would cause would be the requirement of the festival months. I am not worried. Price still remain at Rs 35.5 and it is okay. Q: What’s your sense on the global prices going ahead and how much would that impact the Indian prices here? Murkumbi: Global prices have reached the USD 0.20 level a little earlier than we expected. I think the main deficit is next year. There is a deficit in India. There is a deficit globally next year. Most respected analysts are putting the deficit between 5-7 million tonnes next year, which is pretty large and you must remember this is after 4 years of surplus and the surplus stock that had been created have been eaten down in 2016. Now having achieved USD 0.20 faster than expected, we expect that prices for the next quarter or so will established at around these levels say between a USD 0.18-0.21 band, while the rest of the Brazilian crop gets processed and I think end of November the Brazilian crop should be over. We should have a very fair idea of the crop in India as well by then and also planting intentions in India, planting that is going to happen for the 2018 season. The next lag up for the market is probably closer to Christmas in my opinion. Q: Would you also say the same, would you saying that the prices have factored in the deficit this year and next and also do you see any more government action now after what they have done? Saraogi: Today’s price which I have mentioned of Rs 35.5 it is a very balanced price, which is reflective of the demand supply scenario. As we move ahead production would be in some time November middle or whatever and their peak production period would carry on till about April. Thereafter, one would re-evaluate as to if there is any shortage if at all and the government is very clear that it would act based on whatever it needs. So (a) there is going to be no speculative/and kneejerk reaction from any government body or industry, that’s what I feel. Based on which any decision for import-export would be taken. Everything would be evaluated on a kind of online basis. Having said that demand supply is tight and this probably could be the price range. Q: Would you also say the same that the government measures have had their intended impact and we will now see contained price view? Murkumbi: Well, I think government action has succeeded in keeping the market stable for the moment. However, I think that as we are going to close with 7 million tonnes of stock this year September and I think that is more than enough. It is about 3 months of consumption, which is what it should be. We are heading into production season now starting November. I don’t see any jump in prices right now, but I think strategy based on stock limits and export curbs can only work while there is enough inventory in the country and I don’t see that level of inventory being maintained at the end of next season, whether it is industry or whether it is government, everybody agrees that stocks end of next September 2017 will only be about 4 million tonnes, 4.4-4.3 million tonnes, that is too low. We have never managed in India to keep prices under control with that kind of inventory. The real price move in my opinion will start January onwards and at that time I don’t stock limits and the kind of measures that have been taken this year will work. We will have to increase supply.