In a conversation with ChiniMandi.com, Mr.Rahil Shaikh – Managing Director at MEIR Commodities India Pvt. Ltd and an expert of the industry shared his views on the outlook of the Indian Sugar Scenario.
1. The Govt. has stepped up on ethanol procurement through higher ethanol pricing, considering the capacity constraints, geographical spread, competing demand from industrial alcohol and unsteady demand for ethanol blended petrol (EBP), what perspective do you visualize for the sugar industry?
For 2018-19, no doubt there is capacity constraint to achieve E10 mandate however if we compare supply year over year, then we may see full capacity utilization of 2.7bln vs last year’s 1.6 bln ltrs production, all thanks to higher support prices for ethanol blending in fuel. On competition, with the higher price for ethanol from fuel, I don’t think there is any competition from industrial alcohol, I would rather say, industrial needs to find new ways to meet their demand.
With Government support for capacity building, we may see good future for mills having attached distilleries, but again this can change year on year basis Ethanol support prices for blending as advised by Government, as currently the Ethanol rates confirmed are for 2018/19 season and may change the next.
2. The decision of Brazil to lower production this year has given the Indian Sugar Industry an opportunity to accommodate domestic surplus in the global market. According to you, what steps need to be taken to live up to global expectations?
Agree that Brazilians have given Indians a great opportunity to accommodate surplus, it is our turn now to react positively to the world market and export as much as we can. Indian millers should not waste Government’s efforts as well. India has the opportunity to export approx. 5 MMT and we are currently trading at-least $ 30 pmt positive in international market trade vs domestic trade, such arbitrage needs to be grabbed. In real term this is a golden opportunity for exports.
3. With availability of sugar in excess, unconsumed stock from last year and expected higher production next year an imminent threat about “industry collapse” is being talked about, what are your views on it?
We are back to the controlled era; actually we have done the entire U turn on Industry decontrol, except for cane price which was controlled and under discussion. We invented MSP, Export Quota, release mechanism, etc. (though primitive yet effective), things kept changing to make it amongst one of the most controlled commodity.
Currently I feel with release Mechanism and MSP in place, generous export subsidy, soft loans, all time high Ethanol price there is no need to worry about so called “industry collapse”. Supply & demand in today’s time is controlled by Government and they have ensured there is enough liquidity with the mills to pay the farmers and give sustainability to industry/trade.
4. There are persistent worries about slowing consumption owing to the health issues flagged; how far would this impact the Indian Sugar Industry? What are your figures of consumption of sugar in India?
Agree that Global consumption trends are slowing however Indians are still far away from Global avg. consumption. We (Indians) have many reasons for growing consumption in India. Currently, I am estimating Indian consumption around 25 to 25.5mmt; I still see Government should bring back supply of PDS supply and attempt to provide sugar under PDS to BPL families which will ensure no loss of consumption.
5. The sentiments for exports are positive; however as subsidies will take time to reach the mills would the cash flow constraints hamper the total export volumes?
Challenges are always around subsidies, also exporters are doing the needful to ensure documents are handed over to mills as quickly as possible and I believe the government has also given assurance that they will process the request against the Shipping bills and other documents. Although I think the government could look at some alternate form of payment of subsidy e.g. the drawback which can be deposited against the shipping bill and credited into exporters account directly or any other schemes can be explored such as MEIS.