Sugar stocks gain after cabinet OKs export subsidy

Shares of eleven sugar firms rose from 0.21% to 5.15% after the cabinet approved sugar export policy for evacuation of surplus stocks during sugar season 2019-2020.

Meanwhile, the S&P BSE Sensex was down 197 points or 0.53% to 37,254.91.

Shree Renuka Sugar (up 5.15%), KCP Sugar & Industries Corporation (up 4.97%), Sakthi Sugars (up 3.8%), DCM Shriram Industries (up 3.61%), Balrampur Chini Mills (up 2.63%), Triveni Engineering & Industries (up 2.29%), EID Parry (India) (up 2.23%), Dhampur Sugar Mills (up 2.21%), Dwarikesh Sugar Industries (up 2.14%), Rana Sugars (up 0.95%) and Bajaj Hindusthan Sugar (up 0.21%) advanced.

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has given its approval for providing a lump sum export subsidy of Rs 10,448 per metric tonne (MT) to sugar mills for the sugar season 2019-20. The total estimated expenditure of about Rs 6,268 crore will be incurred for this purpose. The lump sum export subsidy will be provided for expenses on marketing costs including handling, upgrading and other processing costs, costs of international and internal transport and freight charges on export of up to 60 lakh metric tonne (LMT) of sugar limited to maximum admissible export quantity (MAEQ) allocated to sugar mills for the sugar season 2019-20.

In wake of surplus sugar production during sugar season (SS) 2017-18 and 2018-19, notwithstanding various measures taken by the Government, the ensuing sugar season 2019-20 is expected to commence with an opening stock of about 142 LMT and season end stock are expected to be about 162 LMT. The surplus stock of 162 LMT of sugar would create downward pressure throughout the season on sugar prices affecting liquidity of the sugar mills thereby leading to accumulation of cane price arrears of farmers.

To deal with this situation, the government has recently created buffer stock of 40 LMT of sugar for one year from 1st August, 2019. However, even after taking into account this buffer stocking of 40 LMT till 31July 2020 and likely diversion of sugar by way of production of ethanol from B-heavy molasses/cane juice during SS 2019-20 and requirement of normative stock for two months, there shall be about 60 LMT of excess sugar stock that will need evacuation through export.

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