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Sugar stocks on Friday rose sharply after Food Minister Ram Vilas Paswan said that the government is considering raising duty imposed on imported sugar.
"We have to keep farmers' interest in mind and have to ensure that sugar mills are in good financial health to clear Rs 11,000 crore arrear to cane growers," Paswan said.
Shares of all leading sugar producers including Shree Renuka, Balrampur Chini and Bajaj Hindustan gained between 8% and 13% following the minister's comment.
Sugar mills have been demanding the government to increase import duty from current rate of 15% to 40%.
The move will increased the landed cost of import sugar and will help domestic sugar producers increase domestic prices.
India is the world's second largest producer of Sugar after Brazil.
Analysts, however, said that the increase in import duty on sugar will only be mildly positive for sugar companies.
“As such import of sugar is anyways likely to be less as domestic production is high, while Brazil production is low,” said independent stock market analysts SP Tulsian.
Tulsian said that the increase of import duty will also hit import of raw sugar and will negatively impact sugar refining business.
Analysts said that the domestic realisations of sugar has been improving, which is a positive for the sugar industry.
