'Output glut doesn't augur well for sugar industry'

TRADE TALK

Sugar has seen many ups and downs in the past one year. Production has moved up by 45 per cent (from 19.2 million tonnes in 2005-06 (October-September) to 28 million tonnes in 2006-07) while prices have slipped by 32 per cent (from Rs 2,000 to Rs 1,350 a quintal). The glut in output does not augur well for the industry as well as the farmers engaged in cane cultivation. Ajay Modi talks to S L Jain, the director general of Indian Sugar Mills' Association (ISMA) on the outlook for the commodity in the next season.

How do you see the next season for sugar?

The industry is heading for difficult times. Production will certainly not be lower than this season and may go up to even 29 million tonnes or even more. We began the current season in last October with a carryover of 4.2 million tonnes. To this, we may add 28 million tonnes. After a consumption of 20 million tonnes and some exports, we will begin the next season with a stock of about 11.5 million tonnes.

Is there any hope for revival of sugar prices?

Well, this will be completely determined by the demand-supply scenario. As things stand, prices are likely to remain subdued. However, the government's release mechanism has helped stabilising prices to some extent.

Why have exports not picked up despite government incentives?

Over the last few years refining capacities have come up in countries like Saudi Arabia, Iran, Indonesia and Bangladesh. Some of these were the markets for Indian white sugar. They have now started importing raw sugar, mostly from Brazil. We should now focus more on raw sugar exports, which has a market of 6 million tonnes in neighbouring countries.

What will be the impact of huge cane arrears?

It will reflect on fresh sowing of sugarcane and its maximum impact will be seen in the 2009-10 season, when sugar production will see a sizeable decline. However, there will be no shortage.

Do you think that the downturn in the sector has turned away investors?

Certainly, it has. I do not see any possibility of new investments flowing into the sector in the near future.