Sugar stocks trade jubilantly after govt partially removed curbs

Shares of sugar manufacturers are trading higher after the Cabinet Committee on Economic Affairs (CCEA) on April 4, 2013 approved a proposal to abolish the levy-sugar mechanism, under which private millers have to sell a specified quantity of the sweetener to the government at concessional rates.

Balrampur Chini Mills is currently trading at Rs. 49.70, up by 1.85 points or 3.87% from its previous closing of Rs. 47.85 on the BSE. The scrip opened at Rs. 52.00 and has touched a high and low of Rs. 54.00 and Rs. 49.65 respectively. So far 1815220 shares were traded on the counter.

Shree Renuka Sugars is currently trading at Rs. 25.75, up by 0.75 points or 3.00% from its previous closing of Rs. 25.00 on the BSE. The scrip opened at Rs. 27.50 and has touched a high and low of Rs. 28.35 and Rs. 25.70 respectively. So far 6037315 shares were traded on the counter.

Triveni Engineering & Indsustries is currently trading at Rs. 17.09, up by 0.53 points or 3.20% from its previous closing of Rs. 16.56 on the BSE. The scrip opened at Rs. 18.00 and has touched a high and low of Rs. 19.05 and Rs. 16.80 respectively. So far 465666 shares were traded on the counter.

Rana Sugars is currently trading at Rs. 3.62, up by 0.29 points or 8.71% from its previous closing of Rs. 3.33 on the BSE. The scrip opened at Rs. 3.60 and has touched a high and low of Rs. 3.88 and Rs. 3.60 respectively. So far 517691 shares were traded on the counter.

Giving freedom to millers to sell in the open market and removing their obligation to supply the sweetener at subsidized rates to ration shops, the government on April 4 partially decontrolled the Rs 80,000-crore sugar sector.  Assuring the people that the decision will not lead to any increase in sugar retail prices, Food Minister K V Thomas said the government will continue to sell subsidized sugar through ration shops after procuring it from the open markets.

The government supplies about 17-20 lakh tonnes annually through ration shops at subsidized price and decision will lead to government's annual sugar subsidy doubling to Rs 5,300 crore. Sugar industry is the only sector which is controlled by the government right from the production through marketing of sugarcane and sugar.

By adding further, Thomas said the states will be mandated to sell sugar at current retail issue price (RIP) of Rs 13.50 per kg and will be given subsidy for the balance amount between RIP and the current ex-mill price calculated provisionally at Rs 32 per kg. The ex-mill price will be capped at Rs 32 for 2012-13 and 2013-14 marketing years (September-October), he added.

This move by the government is expected to improve cost of production and improve liquidity with millers which in turn will ensure timely payment to farmers. The regulated release mechanism may be dispensed with immediately and the obligation of levy on sugar mills will be paid soon for sugar produced after September 2012.

India, the world's second biggest sugar producer, is expected to produce 24.5 million tonnes of sugar in 2012-13 marketing year (October-September) from 26.3 million tonnes in the previous year. While, the country annual domestic demand is pegged at 22 million tonnes.