Sugar Stocks : Shares of sugar companies fell sharply in early trade on August 21. The government has approved duty-free import of one million metric tonnes of raw sugar ahead of the festive season to boost domestic supply and bring down record high prices. Dalmia Bharat Sugar led the decline, down 5.47% to Rs 480.30, while Dwarikesh Sugar Industries shed 4.32% to Rs. 52.99 happened. Shares of Balrampur Chinese Mills fell 4.15% to Rs. 735.25, and shares of Triveni Engineering & Industries fell 3.82% to Rs 288.60.
Shares of Uttam Sugar Mills fell 3.07% to Rs 325.90, EID Perry fell 2.22% to Rs 792.30, and Dhampur Sugar Mills fell 1.99% to Rs 185.99. Shares of Awadh Sugar & Energy fell 1.53% to Rs 802.20, Bajaj Hindustan Sugar fell 1.41% to Rs 23 and Shree Renuka Sugars fell 1.03% to Rs 25.86. Shares of Simbhavali Sugars remained flat at Rs 7.89.
Duty-free import allowed
On Thursday, the government allowed duty-free import of 1 million metric tonnes of raw sugar till October 31 to boost supply and control record-high prices in the domestic market. India normally imposes 100% duty on sugar imports. The move represents India’s largest sugar import in nearly a decade and comes after a sharp rise in domestic prices due to supply shortages.
According to Reuters, sugar prices have risen by about 40 percent in the past two months due to reduced production. The deadline for importing sugar is important because sugar consumption usually increases during the festive season. During this time, demand for sweets and confectionery increases, and large consumers stock up. The October 31 deadline is intended to bring additional supply to the domestic market during this period of increased demand.
Why was this decision taken?
Port-based sugar refineries, which usually import duty-free raw sugar for refining and subsequent export, can apply for allocation under the 1 million tonne quota. The government will also allow these refineries to sell refined sugar produced from previously imported raw sugar in the domestic market till the end of October.
This decision to import sugar is an important step in the government’s efforts to control sugar prices. Earlier this week, the government tightened stocking rules for large consumers and ordered dealers consuming more than 10 metric tonnes per month to maintain 15 days’ worth of stock. The ban will be in effect from September 1 to November 30.
Sugar prices may come down
Increased supply from duty-free imports can reduce sugar prices in the domestic market, thereby reducing profits for sugar producers from higher prices. However, this had the opposite effect on global sugar prices: following India’s announcement, white sugar futures in London and raw sugar futures in New York rose by up to 4%, as India returned to the international market to boost demand. Shares of sugar companies have seen a sharp rise in the past two sessions. The rally intensified on Thursday, with Balrampur Chinese Mills shares up 18 per cent, Dwarikesh Sugar Industries shares around 14 per cent and several other sugar companies jumping 7-10 per cent.