FRP hike to add to sugar companies' woes: M Manickam

This year, we have produced 32 million tonnes, our consumption is about 24.5 million tonnes, M Manickam, Executive Chairman, Sakthi Sugars, tells ET Now.Edited excerpts:The FRP for sugarcane being hiked, the net impact is going to be about Rs 5-10 per quintal. Is that a big impact for the sugar companies as they pay out a higher price for cane?It is not a big impact but it is adding one more straw on the camel’s back. Already we are suffering. The breakeven is currently at Rs 34 and we are getting about Rs 29-30. We are about Rs 4 under water. And this will probably add another Rs 1 to 2 on top of that. So, it is going to be critical. Also the main problem is that we are producing too much sugar. A signal is going to the farmers and they are producing a lot of sugarcane and we have nowhere to use that sugar or export it. In the export market, you will incur a loss of over Rs 14. How much is the glut in the system -- the estimated production and inventory versus the demand?We started with 4-5 million tonnes of opening stock. This year, we have produced 32 million, our consumption is about 24.5 million tonnes. So, we are adding another 7 million tonnes on top of that. It is about 10-11 million tonnes closing stock we will have this year. Next year, we are expected to produce something like 34 million tonnes, consume 26 million tonnes, add another 8. We will be looking at almost 19 million tons as closing stock next year with a consumption of 25 million tonnes. There is no way that we can export that because our cost of production is Rs 34, the global price is at Rs 20. I do not know how we are going to cope up with the surplus at this point of time.How long before the oversupply situation eases out? At this point of time, it looks very difficult unless the production really drops. We will have to see if the production drops down to something like 28 million tonnes. Then it might be okay but I do not see that on the horizon.

from The Economic Times https://ift.tt/2uPj7Cy