Shares of most sugar producing companies were in good demand on hope that the reform-bound Government will ease its hold on the most controlled sector.

Besides, investors expect the tight demand-supply position to benefit sugar companies.

Major sugar producers including Shree Renuka Sugars, Bajaj Hindustan, Balrampur Chini, Simbhaoli Sugars, Dwarikesh Sugar and Ugar Sugar gained between two and six per cent even as the benchmark Sensex lost 46 points on Tuesday.

The Government controls every stage of sugar production right from sourcing of cane to the selling prices of the finished product.

C. Rangarajan, head of a committee appointed by Prime Minister Manmohan Singh to look into the decontrol issue, indicated that the final report would be out in two-three weeks.

The draft report, circulated to the Food Ministry last week, recommended complete decontrol of the sugar industry by doing away with the compulsion on producers to sell at a discount to the Government for supply under the public distribution system, fixing quota for open market sale, and freeing of export-import.

The panel also suggested that companies share their profits with farmers so that the latter also benefit from higher sugar prices.

Production

Besides hopes of decontrol, sugar production this year is expected to be lower at 24 million tonnes (mt) against the demand of 22 mt. The country exports about 3 mt annually.

“The declining stock-to-use ratio at 30 per cent this year from 35 per cent last year will support the sugar prices to sustain at the current level,” said Chanchal Biswas, Research Analyst, Dalmia Securities.

Clarity on sugar production and likely sugar price will emerge in the next 2-3 months. Sugar price is quoting at Rs 38 a kg.

suresh.iyengar@thehindu.co.in

(This article was published on September 18, 2012)
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