Sugar prices surged as India output hit a 5-year low at 77.95 lakh tonnes versus 111.72 lakh tonnes year on year.

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To discuss the output and price outlook for the industry going forward, CNBC-TV18 spoke with M Manickam, executive vice chairman of Sakthi Sugars and Tarun Sawhney, VC and MD of Triveni Engineering.

According to Sawhney the outlook for sugar prices remain positive. “We have seen international market prices, both raw and white strengthened quite appreciably. There has been approximately 8-9 percent appreciation over the last four weeks in both these international market prices. However, that has not translated into a commensurate increase domestically in north India but we have seen in central India prices have remained quite robust,” said Sawhney.

“Looking forward, New York remains very strong and very bullish and with that we see that domestic pricing will increase by a few percentage points over the coming few weeks and months. It is looking fairly positive,” Sawhney added.

Manickam said, “Price is a controlled segment and so it depends upon how the government is viewing it. We have some exports going out of the country and we have not seen too much of an uptick on the prices so far. But, if the international prices are high, the exports could go up little more. So basically our closing inventory will come down. We started with 14 million tonne, possibly that could come down"

"Our current year’s production is tagged at about 26 million tonne and our consumption is also about 26 million, so we still will be left out with about 8-9 million tonne of opening stock, which is plenty. So, I don’t see a runaway situation in sugar prices but we will have to see how the government reacts and how the whole thing comes up.”

“Prices should just remain where they are, maybe just few points up, not much more,” Manickam mentioned.

Agreeing with Manickam, Sawhney said, we are in a controlled environment in India, where the government comes out with a monthly release quota. "There is a mechanism in place where each sugar manufacturer gets told exactly what quantum of sugar they can sell in the domestic market. So yes, there is a great degree of control there. But sugar, globally and domestically, is highly sentimentally driven.”

"So, at this point of time when we are in a massive campaign for exports - the government has mandated an export of 6 million metric tonnes of sugar, 2.6 million tonnes have already been contracted and given the robust international prices, a large percentage of 6 mt would be physically exported by the country, in this sugar year," said Sawhney. So, the global environment looks positive for sugar prices and so domestically, as well prices would trend upwards, he added.