Sugar stocks sweeten as govt to consider ethanol price, sugar MSP hike

Sugar stocks rose after the central government said it will consider the sugar industry's demand to hike ethanol prices and the minimum selling price (MSP) of sugar

Sugar stocks, including EID Parry, Shree Renuka Sugars, Dhampur Sugar Mills, and Balrampur Chini Mills, among others, rose in morning trades on Friday, September 27. The stocks climbed between 1.7 per cent to 7.83 per cent at the last count on BSE.

The northward movement in the sugar stocks came after the Indian food minister Pralhad Joshi on Thursday said that the centre is considering the industry's demand of hiking the minimum selling price (MSP) of sugar from the current level of Rs 31 per kg, along with ethanol prices.

“We are looking at the sugar production numbers for the 2024-25 season that will start in October before coming to any conclusion on exports. The industry has given us some numbers while we have our estimates based on all the inputs,” Joshi told reporters on the sidelines of the India Sugar and Bio-Energy Conference, organised by the Indian Sugar and Bio-Energy Manufacturers Association (ISMA).

 

Joshi added: Sugar production was good for the 2024-25 season (October to September) on account of a good monsoon.

India last approved large-scale sugar exports in the 2022-23 season, when the limit was set at 6.4 million tons.

Sugar shipments had surpassed 11 million tonnes the previous year, in 2021-22, making it one of the largest ever. READ MORE

Why are sugar companies asking for a hike in MSP?

As per reports, the Indian sugar industry is asking for an increase in MSP to align their prices with the rising cost of production.

The report suggests that the government has hiked the Fair Remunerative Price (FRP) of sugarcane to Rs 340 per quintal for the 2024-25 sugar season, up Rs 25.

This significant hike will have a direct impact on cane prices, which will then influence sugar production costs. Given that mills must pay for sugarcane they procure within 14 days after delivery, this imposes a major strain on the companies' cash flows. Thus, as per sugar producers, it is critical to develop a formula that matches the sugar MSP to the FRP of sugarcane.

In a report dated September 9, 2024, InCred Equities had taken a negative stance on the sugar sector due to low domestic sugar prices.