Markets

Sugar stocks surge on govt sops

Suresh P Iyengar Mumbai | Updated on October 15, 2018 Published on October 15, 2018

Amid good measures, fear of slipping back to control raj remains, says an analyst

Sugar stocks across the board continued their rally for the fifth day in a row on the back of several sops showered on the sector by the government to pay off the cane arrears ahead of crucial Assembly elections in five States.

Uttam Sugar Mills and Dwarikesh Sugar Industries were up 20 per cent and 12 per cent to ₹161 and ₹33, respectively, while Dalmia Bharat Sugar and DCM Shriram inched up 17 per cent and 8 per cent to ₹96 and ₹219.

This apart, Thiru Arooran Sugars (20 per cent), Balrampur Chini Mills (6 per cent), Dhampur Sugar (5 per cent) and Bajaj Hindusthan (8 per cent) also ended the day on a positive note.

The government had taken a series of steps to ease the burden on sugar companies. Last month, it increased the price of ethanol produced from heavy molasses and cane juice to ₹52.6 a litre and ₹59.2 a litre, respectively, from ₹47.3 litre.

₹1,175-cr allocation

In June, the government, through a stock control order, directed sugar mills not to sell refined sugar below ₹29 a kg. It allocated ₹1,175 crore toward carrying cost for creating a buffer stock of 30 lakh tonnes for one year.

In order to augment ethanol production capacity and to encourage diversion of sugar production to ethanol, the government approved a soft loan of ₹4,440 crore through banks to set up new distilleries and expand existing distilleries. It also announced interest subvention of ₹1,332 crore to encourage sugar companies to take up projects to ensure zero liquid discharge.

In order to take advantage of rupee depreciation and boost sugar exports, the government has provided a transport subsidy of ₹1,000 per tonne for the mills located within 100 km from ports, ₹2,500 a tonne for mills located beyond 100 km from the port in coastal States, and ₹3,000 a tonne for mills located in other than coastal States.

These steps will enable mills to clear cane arrears which currently stand at ₹13,567 crore. The industry is currently facing a glut-like situation due to record production of 32 million tonnes in the 2017-18 marketing year (October-September), resulting in a closing stock of 10 million tonnes in September.

Though the sugar industry will benefit from the government measures, it has fallen back to the control raj and their profits will now be dictated by government measures, said an analyst.

Published on October 15, 2018
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