Markets

​Sugar stocks rally on higher export subsidy

Nalinakanthi V BL Research Bureau | Updated on January 24, 2018 Published on February 20, 2015

In an otherwise docile market, sugar stocks gained between 2 and 3 per cent on Friday following the Government’s move to extend sops for raw sugar exports.

The Cabinet Committee on Economic Affairs (CCEA) has approved a subsidy of Rs 4,000 per tonne on raw sugar export of up to 1.4 million tonnes. This scheme will be available for sugar exported between October 2014 and September 2015. The subsidy amount is 18 per cent higher than the subsidy of Rs 3,371 per tonne subsidy provided until September 2014.

While this move will spell some relief for the industry which is grappling with weak domestic prices and supply glut given the expectation of higher output this year, it may not adequate. This is because the exportable surplus is anticipated to be much higher than the 1.4 million tonnes which has been covered under the subsidy scheme.

Sugar inventory

India currently has a sugar inventory of almost 7.2 million tonnes and is expected to produce 26 mt this year. After providing three months’ requirement of about 6 mt as inventory and consumption of 24.7 mt, the industry is expected to have exportable surplus of almost 2.5 mt.

“This move will predominantly benefit mills in Maharashtra and Gujarat” says M Manickam, Managing Director, Sakthi Sugars.

Such quick fixes, no doubt, will help the mills pay a portion (Rs 560 crore) of the whopping Rs 12,300 crore due to farmers. But, the need of the hour is a rational and lasting solution to ensure viability of sugar mills. Cane price rationalisation is very critical to resuscitate the ailing sugar industry, feels Manickam.

Published on February 20, 2015
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