Sugar stock turns sour

A day when Sensex closed higher by over 2% on the back of market friendly budget and record auto sales number posted by Auto firms doubled with the robust factory output number stood at 20 months high. However, most of sugar stock took a heavy beating on a news that government proposal to prohibit industrial use of home-grown sugar.

Dhampur Sugar (closed 6.49% down) slips over 8% in intra-day trade to hits the low of Rs90, Shree Renuka Sugar (closed 2.88% down) also declined about 4% in intra-day to hits the day’s low of Rs160.30 and Balrampur Chini (closed 1.80% down) slides over 4.5% in intra-day to touch the day’s low of Rs100.55.

As per the news report:

Private and cooperative sugar millers have raised objections against the Centre’s proposal to prohibit industrial use of domestically produced sugar. Millers estimate that industrial users, comprising manufacturers of confectionery, biscuits and beverages, may have to import 4.5 million tonnes (mt) of sugar

The government such move would adversely affect sugar prices, which are expected to hit rock-bottom. At present, the commodity is priced at Rs3,265 per quintal. Millers also feel the government move would also adversely impact the financial health of the domestic sugar industry.

Nearly 60 per cent of India’s total sugar consumption of 23 mt is used for industrial purposes. The Indian white plantation sugar having 100-150 ICUMSA (International Commission for Uniform Methods of Sugar Analysis) is acceptable for the industrial use and has been a dominant buyer of domestic sugar.