Sugar stocks buzzed on the bourses on Friday, bucking the Sensex and the Nifty, following the government’s decision to impose stockholding limits to check excess release of the sweetener into the market.
While the share price of Uttam Sugar jumped 11.42 per cent to ~128.25 on the BSE on Friday, that of Shree Mawana Sugars moved up 7.68 per cent to ~65.20. Dhampur Sugars closed with a gain of 5.5 per cent at ~204.45. The S&P BSE Sensex declined 1.18 per cent, or 407.40 points, to 34,005.76. The Nifty50 index finished the day with a decline of 1.15 per cent, or 121.90 points, at 10,454.95.
The sugar industry has seen quite a number of positives in the past few days. First being the government’s decision to double the import duty to 100 per cent to check cheaper imports. Traders feared sugar imports of around 1.5 million tonnes from Pakistan on which Islamabad had provided an incentive of ~11 per kg, or over 33 per cent of current prevailing price of sugar in India. Second, the Centre has levied stock limits that mandate mills to hold above 83 per cent and 86 per cent of their closing stock for February and March, respectively, besides the output minus exports during these months.
“All these efforts have helped sugar prices to stabilise, if not recover, in the past couple of days. We believe the government is concerned about the financial health of the mills. More such steps will help sugar prices move up further,” said Vijay Banka, whole-time director and chief financial officer, Dwarikesh Sugar Industries.
Sugar prices had declined ~6-7 per kg since the beginning of the current crushing season in October amid fears of excess availability. Production in this season is pegged at 26.1 million tonnes (mt) (revised from the Indian Sugar Mills Association’s, or ISMA’s, initial estimate of 25.1 mt) and 4 mt of carryover stocks. Thus, total sugar availability stands at 30 mt against a total annual consumption estimate of 25 mt.
Sugar prices, however, recovered by ~1.50 per kg to quote at ~32 a kg ex-factory. The price works out to be marginally lower than the cost of production in Uttar Pradesh at ~33 a kg.
Union Food and Consumer Affairs Minister Ram Vilas Paswan on Friday said the government was considering scrapping the export duty (currently at 20 per cent) on sugar to allow mills to sell their surplus stock abroad. But the export plan will run up against estimated worldwide surplus production.
“Scrapping the export duty was long overdue. It will be a positive signal for the domestic market. It will reinforce the government’s intention to support the sugar industry and cane farmers,” said Narendra Murkumbi, managing director, Shree Renuka Sugars.
Maharashtra is planning to purchase 2 mt of sugar, around a third of the state’s output, to support mills.
In a related development, Paswan said the Union government is saving around ~16 billion annually in procurement of foodgrain as its tax expenses have reduced after the introduction of the goods and services tax (GST). Only the GST is being levied on procurement and not state taxes, resulting in 18 per cent reduction in taxes on foodgrain procurement, he said.