While global sugar prices have cooled off, Indian sugar prices have stabilised at a level that is helping companies improve their margins. Speaking to BTVI , Sakhti Sugars Executive Chairman M Manickam says India is heading for a shortage of sugar and the prices should range between ₹35-40/kg. Excerpts:

We have seen the global sugar prices cooling off, from $21 per ounce to $19, and so has the Indian prices. Are you concerned over the price fall?

We are actually heading to a situation when there will be a shortage of sugar. The sugar industry is coming out of the low-prices regime to a higher price cycle.

How much of the price pull is due to market development such as raising margins at NCDEX (National Commodity and Derivatives Exchange) and stock control, and how much of it is related to sowing season after a good monsoon?

These are all temporary measures. They are reacting prematurely. The shortage will probably only be in next year. They are looking at the shortage in 2016-17. I think we need to really be focused on the future. But right now the government appears to be panicking too soon, in my opinion. They should take long-term measures rather than opting for short-term steps. But we have to wait and watch.

Are you contemplating the government offloading sugar stocks in the market?

Not really. I don’t think they have so much stock to offload. If they do, we will be facing a shortage next year.

Brazil has upgraded its sugar production forecast, and the demand from China has been relatively strong. What does this mean for the profitability of the Indian sugar industry and companies like Sakthi Sugars?

The industry is doing well. Going by the balance sheet and P&L (profit-and-loss statement) of last fiscal and Q1, most of the companies have done better than last year. Going forward, we don’t expect prices going down to the lows of ₹20-25 per kg as we saw last year. This year, the prices have been around ₹35 per kg and it should be between ₹35-40 per kg.

What’s your current inventory level? Are you expecting more gains in Q2?

It has been a good Q1. In fact, we run our factories in the second quarter as well. So we are optimistic about the second quarter as well. The main driver is not the quantity, but the prices. And the prices are up by ₹10 per kg from last year.

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