Sugar stocks up on rising prices

There has been an increase of 2 a kg in past five days; mills sign export contracts for 450,000 tonnes

Sugar stocks rose 16 per cent on Tuesday following an increase in average realisation and positive signals from overseas markets for exports.

While the stock price of Oudh Sugar Mills increased 16.36 per cent to Rs 39.90 a share, that of Uttam Sugar shot up by 15.49 per cent to Rs 30.20 apiece. The share price of Bannari Amman Sugars, Bajaj Hindusthan and Dwarikesh Sugars rose 6.30 per cent, 5.02 per cent and 4.99 per cent, respectively.

The average price of sugar has increased Rs 1.5-2 a kg in the past four-five days to Rs 29.50 a kg in Uttar Pradesh and Rs 27.50 a kg in Maharashtra. The realisation continues to remain below production cost in both states. This indicates that sugar producers continue to incur losses.

“There has been some activity in sugar stocks in the past few weeks, probably because of the commencement of cane crushing across the country. Some traders believe sugar stocks have bottomed out and therefore, they take some positions there,” said Girish Jain, executive director at KJMC Capital.

Meanwhile, sugar mills have signed exports contract of 450,000 tonnes so far this year, which raises hopes for the overall shipment of the sweetener to remain high this year.

“At this price, however, sugar mills continue to incur loss of Rs 3,000 a tonne in exports,” said Abinash Verma, director-general, Indian Sugar Mills’ Association (Isma).

Meanwhile, the Union government plans to increase the cess on sugar by Rs 100 a quintal to fund its ambitious programme of paying Rs 4.5 a quintal directly into the bank accounts of growers. The issue was discussed in Parliament and Verma says it will be approved by both Houses of Parliament.

The Sugar Cess (Amendment) Bill, 2015 was introduced in the Lok Sabha this week by food minister Ramvilas Paswan, which would give the Centre the power to raise the ceiling on such a cess from the existing Rs 25 a quintal to Rs 200 a quintal. At present, the Central government levies a sugar cess at the rate of Rs 24 a quintal, while the ceiling was Rs 25 a quintal.

The amendment to the Act will enable it to raise the actual cess to Rs 124 a quintal and the ceiling would be limited to Rs 200 a quintal.

According to officials, the government plans to garner around Rs 2,500 crore by the increasing the cess, which would be sufficient to cover the expenses it would incur on transferring the production incentive of Rs 4.5 a quintal, estimated to be around Rs 1,147 crore per year.

Meanwhile, sugar production in India is likely to remain at 27-28 million tonnes (mt) this year against 28.3 mt last year.