Tezzbuzz Desk: There was a sudden huge sale in the shares of sugar companies in the stock market on Tuesday, August 25. Shares of companies like Balrampur Chini, Bajaj Hindustan Sugar and Shree Renuka Sugars fell by about 3.5 percent during trading. The main reason for this decline in sugar stocks is the change made by the government in the rules related to duty-free import of raw sugar. This decision of the government is expected to increase the supply of sugar in the market, due to which investors fear pressure on the profits of sugar companies.
Actually, the government wants to keep sugar prices under control in the domestic market in view of the upcoming festive season. The demand for sugar in sweets and other food products increases during festivals. In such a situation, if the supply remains less then the prices may increase. Keeping this possibility in mind, the government has relaxed the rules for duty-free import of raw sugar. The purpose of this step is to maintain adequate supply in the market and prevent activities like hoarding. Earlier on August 20, the government had allowed duty-free import of 10 lakh tonnes of raw sugar till October 31, 2026 under the tariff-rate quota i.e. TRQ. According to the old rule, importers were obliged to refine raw sugar and sell it in the domestic market by October 31. Now the Directorate General of Foreign Trade i.e. DGFT has changed this fixed time limit.
Under the new rule, importers will now get two months time from the date of filing the bill of entry. That means they have got more flexibility than before for importing raw sugar, refining and supplying it in the domestic market. This may increase the availability of refined sugar in the market in the coming time. The direct impact of this decision was seen on the shares of sugar companies in the market. Investors fear that if the supply in the domestic market increases after processing of imported raw sugar, then there may be pressure on sugar prices. The fall in prices may impact the sales and margins of sugar mills. Due to this apprehension, many investors started booking profits in sugar stocks.
The government has also given relief to businessmen related to advance authorization. The existing Advance Authorization issued under SION E-52 has been permitted to be converted into TRQ scheme for one time. This facility will be applicable in those cases in which raw sugar was imported till August 20. This also includes refined sugar prepared from imported raw materials and sugar that is further processed. However, to avail this facility, companies will have to pay the amount of GST exemption received at the time of import. Overall, this step of the government is in the direction of increasing the availability of sugar during the festive season and controlling the prices, but this decision has become a cause of concern in the market for the sugar companies.