Sugar stocks gain ahead of EGoM meeting

Sugar stocks have jumped this morning ahead of the meeting of the Empowered Group of Ministers on granting permission for sugar exports.

Sugar mills have urged the government to allow mills to fix their ex-factory price around the cost of production. This comes in the wake of big losses last season, due to a dramatic squeeze in the margin between a higher cost of production and lower ex-factory price. A challenge has been filed by mills against the UP decision and it is to be heard in court today.

Although the ex-factory sugar price is determined by market forces, the government indirectly controls this by intermittent interventions in deciding monthly releases. Mills also incur excessive loss on the compulsory levy quota of 10 per cent to feed the Public Distribution System, the price for which is fixed by the government, currently at Rs 18 a kg.

Among individual stocks, DCM Shriram Industries has soared 19% to Rs 49.50. Dhampur Sugar, Kashipur Sugar, Kesar Enterprise and Dhampur Sugar are up 1-15% each. Shree Renuka Sugar, Balrampur Chini and Bajaj Hindusthan have added 1.5% each this morning.