Sugar prices not to rally much from here: Shree Renuka
Published on Friday, August 8th, 2008 at 9:43 AMAuthor: admin (5507 Articles)
Narendra Murkumbi, MD, Shree Renuka Sugar believes the government will not intervene and control prices. He does not see a major rally in sugar prices from here on.
The sugar prices are above Rs 17 per kilogram in the southern part of India while in the northern part it is Rs 18 per kilogram, he said. The company has requested the government to do away with levy on sugar quota.
Excerpts from CNBC-TV18’s exclusive interview with Naredra Murkumbi:
Q: Are you apprehensive that the government might restrain the nascent upmove in sugar prices that you saw last month?
A: No. The sugar prices have now barely inched above the cost of production. However, it has been a rather rapid rise in the last 45 days and sugar prices have gone up about 25%. So they have got a little ahead of fundamentals at the moment and the government has enough of a buffer stock, which they are releasing into the markets over the next few months. I don’t see any major rally in sugar prices from this point. We are up about Rs 17 per kilogram in south India and about Rs 18 per kilogram in north India, which are comfortable levels going forward.
Q: Do you think the government might want to peg those prices back closer to Rs 15-16 per kilogram?
A: We have not received any indication of that. However, the government is urging the mills to liquidate the buffer stock, which was just disbanded last month and we are not sure whether everybody in the country is actually selling their part of the buffer stock.
Q: If the buffer stock is sold down, do you think prices at the retail level can stabilise at Rs 20 and between Rs 17-18 per kg at the mill level or do they need to ease off a bit from here?
A: We are already facing resistance at these levels and any further release will actually temper prices and that would be a good thing. At this stage I think this is the price range of Rs 16-17 per kg, which is warranted.
Q: So can you foresee a Re 1 kind of a cooling down of prices from here?
A: Yes, in the short-term.
Q: What do you expect on sugar decontrol? The cabinet is taking it up, what do you think might come out of it? What are your expectations?
A: There are news reports that it will be discussed in the cabinet. We have two very urgent demands to the government – one is the levy sugar that we are compelled to sell to the Public Distribution System (PDS) at Rs 13.5 per kg, way below the cost of production which is like an additional tax on the sector, it is a social responsibility which should be borne by the government. We are receiving very sympathetic hearing for our request to take that burden on to the Central government and not burden the industry with that.
The second is to dismantle the release mechanism, which means the government tells us every month how much sugar to sell. Now that is something which is causing the market signals to get distorted, therefore causing this huge upsurge in production and very sharp cyclical swings in production partly as a result of the distortion of market signals. So if this decision on sales and exports is left to the industry that would actually be a very big step forward, we have to see what view the government takes on that.
Source : MoneyControl
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