Since this announcement was unexpected and the increase is steep, the company is planning to ask the state government for some SOPs.
Currently, sugar price is hovering around Rs 3300 per quintal, however the company will be able to break even when the price touches Rs 3,500-3,600 per quintal, he added.
Below is an edited transcript of Vijay Banka's interview on CNBC-TV18.
Q: How will higher State Advised Price (SAP) affect sugar companies and where will the realisation stand?
A: SAP has been increased across the board by Rs 40 per quintal which means for early variety, we will pay Rs 290 per quintal, for the general variety Rs 280 per quintal and for the rejected variety Rs 275. The increase is rather steep, we never expected this kind of increase.
We will be presenting our case to the state government, asking for some Standard operating procedures (SOPs). We will request the state government to give us some SOPs otherwise, given the present market scenario where the prices are hovering at around Rs 3300 per quintal, it will be difficult as it is an unsustainable proposition.
Q: Given the new SAP and other costs, what would be your entire cost of production right now? At current market prices can you breakeven on the sugar business?
A: No we will not breakeven. Considering the present cost of SAP our breakeven price will be around Rs 3,500-3,600 and the current prices are around Rs 3300 per quintal. We do expect the sugar prices to get better at around February. As of now prices of sugar are not good enough to absorb this kind of steep hike in the SAP.
Q: What kind of SOPs have been discussed with the Uttar Pradesh (UP) government? How much relief are you expecting on this SAP?
A: So far we have not discussed anything. State Government has already given us one relief which translates through a relief of Rs 1.5 a quintal. They have increased the transport subsidy from Rs 5.75 to Rs 8.75 and considering the fact that we get upto 50 percent of our sugarcane from the centres, it will translate into a relief of about Rs 1.5 a quintal.
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