Sugar stocks gain on hopes of higher import duty at 40%

(Money Control) – Sugar stocks are buzzing on buyers’ radar hoping for a hike in import duty. Shares of stocks like Bajaj Hindusthan , Balrampur Chini , Mawana Sugars , Sakthi Sugars and Shree Renuka jumped 1-5 percent intraday on Thursday as Food Minister Ram Vilas Paswan said he would write to Finance Minister Arun Jaitley proposing a hike in import duty.

The Food Ministry is planning to recommend a hike in import duty on sugar to 40 percent from the current 25 percent to check the sliding price of the sweetener and enable mills to clear mounting cane arrears that has reached almost Rs 20000 crore so far.

In August last year, import duty on both raw and refined sugar was raised to 25 percent from 15 percent to bail out the cash-starved sugar industry.

Paswan has called two separate meetings of farmers and chief ministers to resolve the cane arrear crisis.

The sugar industry is finding it difficult to pay the cane price to farmers as mills have been incurring losses for the last few years due to low realization and high production cost.

The Centre has recently provided a subsidy of Rs 4,000 per tonne for the exports of 1.4 million tonnes of raw sugars to improve the cash-flow of the millers.

Industry body ISMA has been demanding that the government give exports subsidy on white sweetener, create buffer stock of 2 million tonnes and also restructure millers’ debt.

Ex-mill prices of sugar have fallen to Rs 21-24/kg in the country, while the cost of production is over Rs 30/kg.

Sugar production of India, the world’s second largest producer, is estimated to be higher than the domestic consumption for the fifth year in a row.

The government has pegged sugar output at 26.5 million tonnes for the 2014-15 marketing year (October-September), as against 24.3 million tonnes in the previous year. The annual domestic demand is about 24.8 million tonnes.