Sugar stocks up on export incentives

Benchmark Sensex fell 1.26% or 255.14 points to close at 20193.35

Sugar stocks rose sharply on Thursday despite a huge fall in the benchmark Sensex due to the government decision to incentivise exporters to get rid of surplus inventory.

While the share price of Balrampur Chini Mills moved up five per cent to Rs 42 apiece, Parrys Sugar and Oudh Sugar Mills reported a four per cent increase each in their share prices to Rs 16 apiece. The benchmark Sensex fell two per cent, or 255 points, to close on Thursday at 20,193. The mills have been reeling from a continuous price rise in cane and the fall in sugar prices for two years. With negative average margins between Rs 3 and Rs 3.5 a kg, most are seeing losses and dues.

But, in a major relief, the Cabinet Committee on Economic Affairs (CCEA) approved a sugar export subsidy of Rs 3,333 a tonne on Wednesday.

“It will help evacuate excess stocks,” said Vivek Saraogi, managing director of Balrampur.

Spot sugar (M 30) prices jumped Rs 35 to Rs 2,740 a quintal on Thursday. Overall, the white (or refined) sugar price declined 14 per cent to Rs 2,880 a quintal in Vashi Agricultural Produce Marketing Committee (APMC) against Rs 3,360 a quintal a year ago. The trend continued in global markets, also. Raw sugar at 16.2 cents a pound on ICE Futures US in New York fell 1.5 per cent this year and 16 per cent in 2013. Similarly, white sugar, at $445 a tonne on NYSE Liffe in London, was down 0.6 per cent this year. It saw a 14 per cent plunge in 2013.

  The Indian sector has four million tonnes of surplus stock. A CRISIL report said enabling exports of these would reverse the trend of falling prices in the domestic markets. This momentum would be sustained in the sugar season (October 2014-September 2015) due to a continued decline in production led by an expected increase in dues.

“Though not much time is left for producing raw sugar in the balance crushing period, we expect the subsidy would give some of the much-required liquidity to the mills. This would help clear a part of the dues to the farmers, which has crossed Rs 10,000 crore and may touch Rs 15,000 crore in a couple of months. Market sentiments should improve and the domestic prices will stop falling, helping the mills to reduce some of their losses,” Abinash Verma, director-general of the Indian Sugar Mills Association, said. Sanjay Tapriya, chief financial officer, Simbhaoli Sugar Mills, however, said the subsidy would benefit only port-based mills, specially those in Maharashtra.