Sugar stocks drop on profit booking

Shares of nine sugar companies dropped by 0.56% to 9.84% at 13:00 IST on BSE on profit booking after a recent sharp surge in share prices.

Meanwhile, the S&P BSE Sensex was up 296.08 points or 1.16% at 25,778.60.

Among sugar stocks, Balrampur Chini Mills (down 9.13%), Shree Renuka Sugars (down 8.21%), Rana Sugars (down 9.84%), Simbhaoli Sugar (down 2.49%), Triveni Engineering & Industries (down 5.53%), Dwarikesh Sugar (down 0.56%), Bajaj Hindusthan (down 5.77%), EID Parry (down 4.04%), and Sakthi Sugar (down 8.7%) declined.

Sugar stocks had been on a roll recently on hopes shortage in sugar supplies globally will aid domestic sugar prices and help clock modest increase in realisations. Investors were also expecting measures from the government to help offset cane price arrears.

Meanwhile, to further ensure timely payment of cane dues in the current sugar season, the Cabinet Committee on Economic Affairs (CCEA) yesterday, 18 November 2015, decided to provide a production subsidy of Rs 4.50 per quintal of cane crushed to offset cane cost. The subsidy shall be paid directly to the farmers on behalf of the mills and be adjusted against the cane price payable to the farmers towards FRP including arrears relating to previous years. Subsequent balance, if any, shall be credited into the mill's account. Priority will be given to settling cane dues arrears of the previous years.

The Government has notified mill-wise Minimum Indicative Export Quota (MIEQ) for export of sugar. A national grid allocating ethanol supplies to Oil Marketing Companies (OMCs) by distilleries attached to sugar mills under Ethanol Blending Program (EBP) has been notified. The production subsidy is a performance incentive and will be provided to those mills which have exported at least 80% of the targets notified under the MIEQ and in case of mills having distillation capacities to produce ethanol have achieved 80% of the targets notified by the Department under the EBP.

The decision was taken by the CCEA as sustained surpluses of production over domestic consumption in the last five years has led to subdued sugar prices, which has stressed the liquidity position of the industry leading to a build up of cane price arrears. During sugar season 2014-15, the peak cane price arrears were Rs 21000 crore as on 15 April 2015. The Central Government had in the last one year, taken several steps to mitigate the situation and protect livelihoods of cane farmers.

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