Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains!

This is NOT for passive Investors.

Please read on/paricipate, only if you are knowledgable in markets and aware of the RISKS!

As an active investor, I have always wanted to get into thick of action of some or the other cyclical. Intuitively I knew if I can be on top of A CYCLE, it’s the route to some sure-fire quick money in 1-2-3 years. I have been privileged to know some who do precisely that - they are clued in to their CYCLE - and take advantage of them - everytime, without fail !!

Not just Investors but Traders (some are school-friends) who regularly make money in/out of FCI godowns, if you know what I mean!

I have been toying with the idea of taking up one cyclical commodity and going the whole hog after it - but only if there is a simple means of tracking - keeping on top of the cycle. And I was lucky to meet JIGS ( one of my recent trips. He pointed me to the Sugar cycle and the current 6-7 year lows.

When I pointedly asked how as a layman -is there an easy way for me to keep track of the sugar cycle/prices/trends from here on, his simple answer completely disarmed me. This is a guy who knows his stuff! He said - just track sugar companies results along with the rise/decline in the promoter holdings of late - and check the spread! And he had ready data to show me:)

It is interesting/educative to listen to him expound on the Export cycle which is on us now. His favourites are soft commodities, pharma/agri-chem if I remember correctly. And if you keep challenging him like I did - he has data over 20 years in Indian markets and over 100 years of US market, to make a point.

It’s upto us to make a start! Time to automate sugar tracking on and call my Sugar trader friends.

Welcome to those interested in tracking/profiting from the Sugar cycle


Reproducing here JIGS initial post on Sugar Cycle from his blog. (Recently closed down, no more updates I assume; what is already posted should remain I guess; taking noc chances).


Indian Sugar Prices Monthly Chart

We like cyclical nature of any industry because being once you understand duration of up and down turn of that industry’s cycle and figure out when to buy it you can make 5-10baggartype of returns. When times are bad every Analyst/Fund Manager ignore the sector but cycle always turns and same Analysts and Fund Managers want to jump when they see that they have missed big opportunity.

Over last few months we have been trying to understand Indian Sugar Stocks when we saw majority of promoters buying from market and increasing their stake. Remember sugar stocks peaked inbeginningof 2006 and now even leading sugar companies - Bajaj Hind, Balrampur Chini, Dhampur Sugar etc. are available at 70-80% discount to 2006 peaks that too after 7 years :-). Currently, Sugar sector is not fancied because of Govt. restrictions like 10% PDS levy, Release mechanism, High Sugar Can pricing policy of Center/States etc. However, When we look at sugar stocks all the negatives are currently priced in and once sugar prices start up trend we will see every issue getting resolved. So, our next task is to figure out when can we expect sugar prices to rise.

We checked Indian sugar stocks data over last 25-30 years. Last peak stock prices were in Apr 2006 and before that peak stock prices were in Dec 1994 so we see that they took 10-11 years from peak to peak… We note bottom happens at the end of 7-8 years and next 3 years stock rise. If this trend repeats we may see bottom in Sugar stocks this year in 2013 or next year 2014 and major peak in 2016 or 2017.

We also checked US sugar prices over last 100 years. We note that US Sugar prices have risen every 5 years - Last Feb 2011 before that in Feb 2006 before that in Oct 2000 before that in Jan 1995 before that in Mar 1990 and so on. So most likely they will go up by 2016. This data also suggest we may see rise in Sugar stocks by 2016.

We finally went through NCDEX Indian spot prices of Sugar ex. Kanpur and we attach monthly chart for the same. (Data courtsey of


If we see above historical chart of Indian Sugar prices we can see Indian Sugar prices started rising from July 2008 prices of 15-16/kg to a level of Rs. 44/kg in Jan 2010. They are consolidating now and if we draw trend line connecting July 2008 and March 2012 lows we see that Prices may stabilize around 33-34/kg in near future for some months. 2 indicators we follow CCI and Trend Indicator suggest prices may go down but because rising trend line support they may NOT fall in major way so looks like we may see short ranged prices for few months before starting fresh uptrend once it touch trend line.

Safest strategy could be buying sugar sector stocks once sugar prices cross 44/k.g. Moment 44/kg is crossed we will be sure of new uptrend in Sugar stocks. We expect that to happen sometime in second half of 2013. Lets keep tracking.

*[[8:42 AM]: 2013-01-20T08:42:00-05:00


Hi Don,

Share price of Balrampur Chini is Rs.40 with a huge volume consolidation area below Rs.10; So one could safely say that the downside is Rs.30; And the topside is 160 to 200;

I have checked on fundamentals. The company is a survivor. It has a strong presence and has not been diluting equity like Bajaj Hind.

Balrampur Chini is a multi-bagger. I suggest SIP in this stock.

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Hi Donald Ji,

It would be nice if you can give the data comparing “sugar companies results along with the rise/decline in the promoter holdings of late - and check the spread”.

For past 5-6 quarters I don’t see any major change in promoter holding of Balrampur, Renuka, EID Parry, Piccadily Agro etc.

Am I missing something?

Going through the below link should also help.

Some regulars at Valuepickr have also taken part in the discussions here.

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@ Jatin

Pls drop the “ji”. Need to ask Admin to issue a directive:)

We can automate this in Will check tomorrow. If I remember correctly there were enough changes in Balrampur Chini and many others - he showed from a Table.

@ Amit Jain

Forgot to mention JIGS advises sticking with the best in the Industry. The best Management Integrity, the best long term record etc. I don’t believe in Free Lunches - so we will do much more work to establish where & when it is a no-brainer to invest and what to avoid.

E.g those with large exposure to UP run additional risk of maverick regressive state policies (as announced recently). Someone was mentioning Erode based firms are the best in productivity margins et al - think Ponny Sugar - think it was Ayush

@ Ramsaravana - thanks. All links to get on top of subject most welcome (pros and cons and risks and more)

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A bit dated Indian Sugar Industry PDF from KPMG

**Excerpt from Shree Renuka Sugars AR 2013 - **on what is happening in the Industry

Sometimes it’s important to note multiplicity of events/announcements/policy changes that inevitabily are important ingredients - towards a change in cycle dynamics:)

In the sugar business in India, there has been a landmarkdecision, when the Government declared the partial de-controlof the sugar sector in April 2013.

By eliminating levy sugar purchased at a discount of 40% tothe market price and moving to the open market purchase ofPDS requirement, the Government has at one stroke enhancedthe earnings ability of sugar companies. We estimate that yourCompany will make substantial savings annually.

Quantitative restrictions on domestic and export sales of sugarhave been removed and it is our view that the ability to marketour product at the time of our choice will lead to companiesbecoming more competitive with the ability to manage theircash flows according to their inventory management and pricescenario. However, we are presently witnessing an adjustmentperiod wherein smaller companies in the sector with highworking capital requirements are aggressively selling their stock,thereby applying pressure on the prices.

This year Maharashtra & Karnataka suffered from anunprecedented drought with a large area of the state facingscarcity of drinking water. In this context, many voices were raisedabout the viability of producing a water intensive crop, wheneven drinking water was scarce. We have since inception beenconscious of our duties and have initiated measures to ensurethat water usage and waste from our manufacturing process isminimised and we are moving towards becoming water neutralin our industrial operations.

Sugar prices towards the end of the year in India fell withmany companies facing working capital paucity aggressivelyliquidating stocks. In many states, the selling price of sugar isclose to or lower than its cost of production.

In our Ethanol business, there was good news at hand. In January2013, the Government of India notified the Fuel Ethanol mandaterequiring OMCâs to blend 5% ethanol with petrol on an all Indiabasis. As against the fixed pricing, the Government allowedsugar companies to participate in tenders based on competitivebidding. We have received good orders for fuel ethanol and thisaugurs well for the profitability of this segment going forward.

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Another way to play the sugar cycle is to pick up something like renuka sugar… it is currently riddled with debt and other problems… when the cycle turns these are the stocks that give max returns…

Personally I dont have much idea about sugar sector but looking at the charts shows that the capitulation phase is almost over and once the base building takes place, there could be a rally.


Personally I have burnt my fingers by investing in sugar companies stocks about 5yrs back. But now I understand that my entry was during the downturn of the sugar cycle. Geographical presence is very much important as different parts of India has different yields. Erode and UP has higher yields than that in Maha/Guj. I do cultivate sugarcane in our farm. Recently this year’s sugarcane price was announced @2351 per ton. Normally the sugar companies in Guj has 11 to 12% yield(that is for one ton of sugarcane, they get 110 to 120kg of sugar). This is one of the highest price in last 4-5 yrs. The last peak price was roughly 7-8yrs back.


From some of my sugar circle friends:)

)- Sugar cost of production is 36/kg and currentsugar market prices are 33/kg in wholesale market.This is not sustainable and supply willstart declining.

)- Even in this situation Balrampur is making 7 Rs Epsdue to by-products - ethanol and power.

)- Someone who is interested in the sugar cycle should justkeep track on 2 things to know if sugar hasstarted uptrend

1). Actual Sugar prices in US and India. Bloomberggives US Raw sugar prices and NCDEX gives spotsugar prices daily per kg.

2). Quarterly result of sugar companies YoYbasis

Once sugar prices goup above Rs. 36/- companies will start makingmoney. e.g. Balrampur capacity is 76,500 TCD,Implies for every 1 Rupee rise will increasecompany’s 0perating profit by 76.5 Cr

Better to stick with businesses with unquestioned management integrity.Corporate Governance issues abound in Triveni Engineering


If you are all looking at Sugar seriously, why not consider EID Parry? It is also a holding company for Coramandel International, and I looked at it some time ago, but the value of EID Parry is less about half the value of its stake in Coramandel International. Indeed, the value of its quoted investments-long term debt, is in fact smaller than its market cap as of today. It also has a nice biopesticides and nutracueticals business,which is small compared to the sugar business, is really growing fast.

So, why pay money for Balrampur Chini or Renuka. Get the EID Parry Sugar Business for free?



Disclosure: Own Stock in EID Parry, about 1.5% of my portfolio

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And yes, a dividend yield of 5% plus for EID Parry

Good to see discussion on sugar sector. This was on my list for long time but could not take it up as was busy in other stuff. Hope to start working on this soon. My reason for looking at this sector is a) first one most obvious everyone hates sugar sector now and stocks are priced as if nothing EVER can go RIGHT with sugar stocks b) returns are not dependent on either growth in economy or market cycle, but more on sugar cycle itself, which more or less is independent of the two. Of-course, government can play a havoc and push recovery a couple of years ahead.

From Ponny Sugars website

Sugar Decontrol

The Central Government has finally taken the crucial decision to liberate the sugar sector from the clutches of excruciating controls. Pursuant to the recommendations of Dr C Rangarajan Committee made in October 2012, CCEA on 4thApril 2013 decided to do away with levy obligation for sugar produced from October 2012. While Government would continue with PDS sugar for BPL families, the subsidy burden would henceforth shift from the industry to the Government. Further, sugar release mechanism has been dismantled to confer greater freedom on industry for managing its cash flows. This indeed is a watershed decision to bring about greater certainty, stability and rationality into the system and has the potential to propel the sugar sector to higher growth trajectory.

The decontrol move is well begun but is just half-done. The reforms have conscientiously covered the sugar-side in a comprehensive and conclusive manner but consciously shied away from addressing the sugarcane-side. The Centre has pragmatically left certain major decisions to States like linking sugarcane price to realization from sugar, cane area reservation and minimum distance criteria between two sugar mills and pushed ahead with only the first phase of reforms. It is however imperative that a long term formula on cane price with linkage to revenues from sugar and its by-products is evolved soon to decisively address the cyclicality in sugar production and build a long term relationship between the industry and the cane farmers.

Outlook for 2013-14

World sugar balance would record a surplus for the fourth year in succession in 2013/14, a feat not witnessed for over two decades. The only redeeming feature is the strong ethanol price parity that would prompt Brazil divert a larger share of cane from sugar to ethanol production to correspondingly slice the size of surging sugar surplus. With export availability outweighing demand, world prices would remain bearish, virtually shutting the export window for the high cost Indian sugar.

Indian Meteorological Department has predicted a normal monsoon for 2013 for the country as a whole but a sub-par rainfall in the southern parts that include Tamil Nadu. With likely steep fall in cane area in Maharashtra, Indian sugar production would decline by about 10% during 2013/14 sugar season. This is still adequate to meet local off-take, thereby limiting meaningful scope for inventory draw-down. Accordingly, local sugar prices should only remain range bound under continual supply side pressures.

Meanwhile, there was advance signaling by Centre in hiking Fair and Remunerative Price for sugarcane for 2013-14 by a hefty 24% (Rs.170 to 210 per quintal). State Governments are generally prone to give pro-rata or higher hikes and hence cane pricing risk looms large on the industry.

With persistent drought, sugar production in Tamil Nadu is on the throes of steep decline and the industry may hardly operate at 50% of its potent capacity. Your Company has been the hardest hit on this front, with fresh cane planting having virtually come to nought and ratoon crops wilting under woeful water shortage.

There are thus clearly more negatives and little positives for the sugar industry in general and your Company in particular in the coming year. Your Company is poised to face the severest of challenge in recent times on cane availability, sugar recovery and margins. It has of course no choice but to play a patient waiting game till the resumption of monsoon and restoration of water flow in river Cauvery for the turnaround of its production prospects. In the meantime, its strong fundamentals should stand in good stead for battling the near term challenges.

Company Performance

The operations of the Company during the year were painfully punctuated, rather punctured, by the onslaught of acute drought that engulfed the entirety of its operational area. Total failure of monsoon, low level of water in the Mettur reservoir, poor flow in river Cauvery, depleted water table and disruptive power supply have together come to inimically impact irrigation and strikingly shatter the very base of cane cultivation. As a result, cane area and average yield fell steeply that cut our cane volumes by 12%. Sugar recovery too suffered by reason of poor cane quality. Raw sugar import to supplement sugar production was unviable under extant price parity.

The Cogeneration Project was commercially commissioned from 1stSeptember 2012. We produced 448 lakh kwh in the new Cogen plant and exported 338 lakh kwh to State Grid under the long term Power Purchase Agreement. We were however hard hit by the steep reduction in the tariff fixed at Rs.3.76/ kwh under the 2012 Tariff Order by the Tamil Nadu Energy Regulatory Commission as against Rs.4.37/ kwh under their 2009 Tariff Order. While the tariff is cost based and every element of cost has conceivably gone up considerably in the last 3 years, the drastic downward reduction by the Regulator has rather come as a bolt from blue. We have challenged this tariff order, along with other sugar companies in the State, before the Appellate Tribunal for Electricity. The hearing is complete and the Appellate order is awaited.

Sugar sale volume declined by 33% under sluggish market conditions, leading to larger inventory build-up to our discomfiture. Indeed, we have recorded negative top-line growth despite the commissioning of a new revenue stream ie. Cogen project during the year.

Sugar prices rose sharply during the second quarter but relentlessly receded from the third quarter onwards. Molasses price too remained stubbornly subdued throughout the year.Sugar segment had therefore to reckon with negative margins for most part of the year.

In the end, our PBT has declined by more than half YoY. PAT however has moved modestly due to beneficial deferred tax impact of Cogen project. Considering the enormity of external challenges brought about by the severity of drought and sluggishness of sugar market, our overall performance should be regarded reasonable and satisfactory.


This can be played in 2 ways.

Alternative-1. The simplest is to buy painfully small quantities in a long term SIP. If you wish to allocate 10% of your portfolio to a stock in this sector, then you buy 0.4%-0.6% of portfolio per month, till you hit the 5% mark over 1-1/2 to 2 years. Just make sure that the co you are investing in will survive long enough to take advantage of the uptick when it happens. Advantage: Easy to follow. Disadvantage: If the boom arrives before you have accumulated the desired quantity, you will end up betting too small to make a difference to the overall portfolio.

Alternative-2. Keep a sharp eye on sugar prices and insider behaviour, and jump in when things look promising. Advantage: Large returns in very quick time Disadvantage: Requires, smart judgement and timing.

Since I am not very confident of my abilities to time Alt-2 correctly, I have been following Alt-1 in Shree Renuka Sugar from Apr-2013. I chose Renuka because the co is currently burdened with huge debt and every other problem possible, yet looks good to survive for next few years. Its Brazilian operations are insulated from govt interference, so the co could draw max benefit from a rise in international sugar prices.

Right now I am sitting in losses. More importantly I am finding it very difficult to follow the boring discipline of SIPing slowly. I am wondering if there is a better way to play this. Any suggestions?

âThe partialdecontrol is amajor step towardsprogressiveand completederegulationâ

Balrampur Chini Managing Director Vivek Saraogi analyses the impact of the partial decontrol.

Q. How would you assess the sectoral reality?

A. Three important things happened atthe close of 2012-13 which promise tobe an inflection point in the industryâsfortunes: the government abolishedthe longstanding levy quota and sugarrelease mechanism, making it possiblefor sugar realisations to find theirown true level based on marketplacedynamics. The government also agreedto a market-linked price of ethanolthrough a tender-based process.

Q. Can we start with the short-term impact on the industry?

A. It has been amply proved overthe last couple of decades of Indiaâsliberalisation that increased competitionis the best antidote to inflation andprofiteering. This has been visiblydemonstrated through a number ofsectors. Take telecom, for instance.

A freedom to compete attracted anumber of Indian and internationalplayers; tariffs progressively declined toa point where Indian rates are probablyamong the lowest in the world; Indiaâstelecom coverage is one of the widest;there is hardly any national stretchthat is not covered; the benefits of thissectoral liberalisation have filtered downto rural India. This is precisely what wefeel that progressive deregulation cando in Indiaâs sugar industry as well.

In the first two months following theannouncement, one would have noticedthat sugar prices declined, which goesto show that lower industry controlsactually work in the consumerâs favour.

Q. What do you think is going to be the medium-term impact on the Company?

A. It is here that I feel that the biggestimpact will become visible. As long asthe sugar industry was regulated by themonthly release mechanism, the numberof participants were limited, there wasa limited role for price forecasting andthere was an absence of a pre-salemechanism. Following deregulation,an entirely new industry segment isexpected to open up, benefiting allindustry stakeholders.

Let me analyse theimplications point by point:

Levy loss: The removal of the levysugar obligation will reduce theindustryâs estimated loss of `3,000 Cr onthis account as it presently supplies levysugar at below production costs.

Flexibility: The deregulation willprogressively create a sector with anumber of flexible options. It will bepossible for players to not just buy andsell inputs and end products; it willbecome possible for players to prebuy,hold, pre-sell as well. I wouldcompare the deregulation impact withwhat has happened on the countryâsstock exchanges: earlier, it was possibleto only buy and sell; then it becamepossible to go long and short; finally,the markets moved to futures andoptions, which widened the market anddeepened liquidity. This is what we feelwill also happen to the countryâs sugarmarkets.

Hedging: In a partly deregulatedenvironment, there will be a room tohedge oneâs position. For instance, if Iam a farmer, I will be able to pre-sell twoyears of cane crop at a specific price to aclutch of mills, engage in a back-to-backfixed arrangement with farm labourersand input providers to progressively capcosts. As an extension, the farmer willbe able to securitise this projected profitwith a bank or financial intermediaryand mobilise a loan to make it possibleto buy another stretch of land. As aresult, this simple means of hedging canpotentially take the uncertainty out offarming and graduate it to the level of abankable sector. These are possible once****the cane price linkages are implementedin the sugar industry.

Players: The sugar sector will attract anumber of large and global institutionsand trading houses (agri funds andcontra funds as in the internationalmarkets). Now that the playing fieldhas been deregulated and sugar pricingpermitted to find its own level, a numberof these players will be inclined to enterthe country and take positions, wideningthe market.

Sale contracts: Earlier, sugarcompanies manufactured the productand sold periodically to dealers asadvised by the government releasemechanism. Progressively, companieswill have the option to pre-sell an entireseasonâs output to institutional buyers(who in turn can lock in their prices) orglobal fund managers against committedcontracts with the objective to securetheir cash flow and focus on productmanufacture or cane developmentinstead.

Perspectives: The decontrol of theend product in terms of the releasetiming and quantity will now prompta number of perspectives to emerge.Some may feel that sugar has peakedin the short-term and be inclined topre-sell, someone may feel that a risein international price could lead Indianprices and hence buy. This opiniondiversity will provide the basis of a large,vibrant and liquid market for the endproduct.

Re-balancing: For years, the industryinvested in product manufacture,resulting in a skew between the industryscale of product manufacture on the onehand and the industry scale for tradingon the other. The partial decontrol willkickstart the re-balancing to a pointwhere the countryâs sugar tradingenvironment will correspond to the sizeof national product manufacture.

Profiteering: As it turned out,immediately after the decontrol, free-salesugar realisations declined because thelatter were not influenced as much bythe short-term impact of the deregulationas much by the medium-term impactof the demand-supply balance in thesector. A few critics have indicatedthat with the sugar end of the businesshaving been deregulated, there couldnow be a case for cartelisation and pricerigging. One finds this perspective farfetched:there are more than 600 sugarmills in India and cartelising them isvirtually impossible.

Sorry in my previous message please read “hit the 10% mark over 1-1/2 to 2 years” instead of “hit the 5% mark over 1-1/2 to 2 years”

Balarampur Chini MD continuing to expound on the industry dynamics…

Q. Do you think this test case of linking raw material costs and sugarrealisations is going to be watched with keen interest?

Absolutely. This is something that even the Rangarajan committee has indicated. De-reservation of cane area and a derived cane-price formula. The word “derived” is critical. It indicates that can price will not be an absolute but linked to another variable. In this case the cane price will be linked to the price of cane in the marketplace. The higher the rise in the sugar realisations the greater will be the price paid to the cane farmer.This is equitable for some valid reasons. The cane price will no longer be treated as an 'expense" in the conventional sense, but as a share of profits earned by the sugar companies. No longer will the cane grower be treated as a vendor, but as a partner.

Q. It might then be pertinent to understand what aspects of theliberalisation have not happened?

A. The big thing that has not happenedis cane decontrol. Clearly, the industryneeds to move towards raw materialreform, which, when it happens, couldlead to a complete sectoral decontrol.The operative word here is âlinkageâ;when we talk of cane decontrol, whatwe indicate is not that the pricing ofcane be completely decontrolled; whatwe indicate instead is that, as per thefindings of the Rangarajan Committeereport, the cost of cane be linked to therealisation of sugar in the free market.

This is an internationally-tested model:this ensures that any increase in thesectorâs profitability is equitably sharedbetween its manufacturers and growers.When we finally have a decontrolled rawmaterial side, we can truly claim thatreform and liberalisation have arrivedin Indiaâs sugar industry. At that point,every stakeholderâs interest will havebeen balanced, creating the foundationfor the business to attract more playersand investments.

The Rangarajan Committee has gonea step further in this proposed linkage;it has proposed a sharing percentageat a level higher than what is practicedabroad, which more than secures theinterest of farmers. Since this is anindividual state-based subject, this maybe more difficult to implement than adecision taken at the Centre. However,what is heartening is that within the firstcouple of months of deregulation, theKarnataka Government moved aheadwith the proposed linkage to deregulateraw material pricing from arbitrarygovernment pricing, a responsible stepfor the industry.

Q. How does de-reservation fit into the ongoing scheme of things?

A. Currently, a farmer can also sell to aspecific mill in his command area. In theproposed scheme of things(de-reservation), a farmer will be freeto sell his cane (full or part) to any millthat he wishes to. This will be in thefarmerâs benefit for a number of reasons:he will be free to market his cane towho ever pays him the highest andfastest, strengthening his cash flow. Inour opinion, this is the most powerfulantidote to mounting cane arrears.

Besides, the farmer will be able to enterinto back-to-back partnerships contractswith select mills not just for a season butfor a number of seasons, which, in turn,could make it possible for the mills to goahead and invest in higher capacities.

This we feel will create a robust industryfoundation. The sector has not seenfresh investments for years; thisde-reservation reform could provide itwith the impetus to bring funds backinto the industry. Dereservation couldalso free the farmar to sell the sugarcanewith the linkage of the sugar cane priceformula to protect him.

Q. If this represents a win-win situation, why is it not being implemented?

A. There are some vested politicalinterests who have until now enjoyeda ground level say in the fortunes ofthe countryâs sugar sector. A completedecontrol will mean that their interestswill be marginalised and the industryleft to a free interplay of marketplacedynamics.

The time has come for a complete rethink.Consider this: sugar is the largestsector in Uttar Pradesh and is sick; noinvestment has gone into enhancingcrushing capacities for years, aggregateindustry profits have declined, caneprices have only increased year-on-yearand yet cane arrears are at a record`6,000 cr.

This means that somethingfundamental has gone wrong. It wouldbe interesting to see what history iswilling to teach us: the governmentthat has inevitably raised cane pricesas a means to gather local supporthas inevitably lost the subsequentelection. This echoes an incident fromanother prominent Indian state wherethe government literally encouragedlabourers to become militant, promptinga flight of capital. This is what UttarPradesh needs to learn: that if policiesare win-win â in the balanced interestsof growers and manufacturers â therecan be hope of long-term prosperitybeing generated from that sector.

Q. What is the outlook for the sector and the Company for 2013-14?

A. There is no conventional businesslike the sugar business, but only if it canbe liberated from political control. Wherecan you get a sector where a profitablecore product generates two profitablespinoffs that serve demand-supply gapsthat are likely to linger well into thelong-term?

Where can you get a sectorthat has the potential to drive agriculturalprosperity hand in hand with industrialgrowth? Where can you get a sector thataddresses growing food requirementson the one hand and clean energyrequirement on the other?It is only a matter of time before thegovernment embarks on the completeliberalisation of one of the last vestigesof the pre-1991 era.

Based on thisoptimism, we are making a fresh capitalinvestment after six years; we areinvesting around `52 cr, which will add12.7 MW to our cogeneration capacity,with an attractive payback. Besides, weare contemplating investing in a distilleryonce the government clarifies the ethanolpolicy.

Nice to get a birds-eye-view of the issues impacting the industry. But, I have been advised to take all that is put out by the Management/Media every time there is some policy change, with a large pinch of salt:).

However I would like to learn/get guided from the sugar-cycle experts

a) Isn’t it true that this time there are solid fundamental changes on the ground, which makes it easier for the industry - the partial de-control - free of the release mechanism, and free of bearing PDS subsidy? This should work to Industry’s advantage?

b) De-Reservation and Linking Sugar-Cane price to free market sugar price ; We should ignore this? this is not happening in near future (next 2-3 years?

c) We should ignore these policy changes altogether - as ignorables, and simply FOCUS on the demand-supply mismatch over medium term

d) We should Focus on Sugar price rise (Y-o-Y) and promoter shareholding rise in tandem

e) Is it correct to say the sugarcane price rise mismatch with sugar prices in market has always been there. And it has not ever prevented the sugar bull cycles from ramapaging away - the strong players have always made super money, when the cycles have turned; the sugar-cane price becomes irrelevant in the scheme of things then?

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