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“My take would be that the overall sugar production in the country would be probably marginally in excess of 32 million tonnes and the sugar diversion, which was earlier capped at around 1.7 million tonnes by the government, might actually end up being about 2.3 or 2.4 million tonnes,” says Atul Chaturvedi, Shree Renuka Sugars.

Tell us firstly about this news, the fact that there are reports emerging or suggesting rather that the government may allow allocation of additional 8 lakh tonnes of sugar for ethanol production. Do you see merit in these reports, I mean, have you heard any formal notification to this regard?
In fact, we have not heard any official notification to that effect. But what we have seen from the Bloomberg reports and all that the government is deciding or probably planning to allow another 800,000 tonnes of sugar diversion. But having said that, I think the crushing season is more or less over. It is at the fag-end of the crushing season. So, whatever extra B heavy molasses have been lying with the mills, that will get diverted to ethanol because the molasses cannot be converted back into sugar. So, my take would be that the overall sugar production in the country would be probably marginally in excess of 32 million tonnes and the sugar diversion, which was earlier capped at around 1.7 million tonnes by the government, might actually end up being about 2.3 or 2.4 million tonnes. So, just some more details in there and thanks for so candidly spelling out the numbers for us, if at all this move then comes into effect, will it be with respect to sale of ethanol already produced from sugarcane juice and B heavy molasses before that was imposed in December last year or this allocation you suspect is going to be a fresh?
It could be probably a mixture of both. Whatever extra had been produced will also now get converted into ethanol if this policy comes through and then gets supplied to the oil marketing companies.

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In any case, the oil marketing companies are still not able to maintain a 12% blending level and that is largely because the government had restricted ethanol to be produced only from molasses.

So, I think this would be a blessing in disguise and probably a lot more ethanol could get diverted to the oil marketing companies.

So, overall, if it happens, it is a positive sign and it is a welcome move by the government because otherwise it did not make too much sense because we are in any case having a surplus sugar because our sugar production has been much higher than what was initially anticipated.

What is the outlook then, given that the sugarcane crushing has improved as the sugar season has progressed, do you think that production will inch up significantly higher for the full year? Could the full year sugar production be above 32 MMT?
No, actually, during the month of August when the rains did not happen, so the industry was a little too disheartened and the talk was that the production of sugar in the country would be probably below 30 million tonnes. But subsequent rains during October and November have probably helped the cane big time, with the result that now you are probably talking in terms of production in excess of 32 million tonnes.

So, this would be for the full crushing season and the projections for the next year also seem to be now on a positive note because Skymet has come out with the declaration that we could have a much better monsoon going forward. So, I think overall it is positive for the industry.

And now, with this probable allocation of more sugar for ethanol, are you completely ruling out the possibility of a release of the export quota for this sugar season?
We would love, in fact the industry has been asking the government to at least give a million tonne more of sugar for exports, but we do not anticipate any action on that front, at least till the elections are over.

So, till June, we do not expect any action on that front. But as an industry, we certainly would like, because international values are much higher than Indian values.

And in any case, what we were anticipating is that at the end of the year if the exports do not happen, our 5.6 million tonnes of carryover might actually become anything between 8.5 to 9 million tonnes.

So, carrying excess sugar also would not make too much of a sense because 6 million tonnes of sugar is good enough to take care of practically two-and-a-half to three months of consumption. So, that is where we anticipate some action post June, after the elections are over and done with.

Have to discuss the consumer angle as well. What about retail sugar prices, are they going to inch up higher?
I do not think this current diversion possibility will have any effect whatsoever on the sugar production and sugar values in the country. But having said that, once the summer hits in, the sugar consumption generally goes up and we could probably see a rise of about a rupee or somewhere around that per kilo, so that I would not say is anything which is game-changing.

So, I think the consumer is heavily protected or insulated from the world values. Possibly I would go to the extent of saying that sugar is the only sector in the country among the commodities which is totally inflation-proof.

What is your understanding of the global crop cycle? Last couple of years have been literally all over the place, especially for a country like Brazil, which in a sense always sets the benchmark.
Yes. So, in fact, Brazilian sugar production is not likely to come down. Last year was probably in excess of about 42 million tonnes and with ethanol values closer to about 15 cents and so we feel that the sugar production in Brazil is not going to come down and Thailand also seems to be producing much more sugar than what was anticipated.
So, overall, we do not see sugar in short supply in the world. The only issue is whether India would be exporting or not and India is definitely a swing factor as far as the world sugar values are concerned. So, at the moment, I do not see sugar being in deficit in the world.

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