Investors turned bearish on sugar company stocks on Wednesday as they expected the Government measures, to rein in the runaway sugar prices in the retail markets, may impact the bottom line of the companies.
Balrampur Chini Mills dipped 8 per cent to Rs 132, Shree Renuka Sugars fell 4 per cent to Rs 209, Triveni Engineering and Bajaj Hindustan shed 6 per cent each to Rs 116 and Rs 221, respectively. Dhampur Sugar Mills and Dwarikesh Sugar dipped 4 per cent each to Rs 109 and Rs 110, respectively, and Simbhaoli Sugar Mills fell 3 per cent to Rs 72.
The Government on Wednesday extended duty-free import of white sugar till December 2010 to tide-over a gap of about eight million tonnes (mt) between supply and demand. The earlier order on tax-free sugar imports ends in November.
International sugar prices have risen steadily to historic highs in last few months on the possibility of large scale imports by India.
Production and prices
The country is expected to produce 16 mt during the sugar season that started this month, much lower than the 18 mt forecast by the Agriculture Ministry.
The sugar production fell to 15 mt in the year that ended September 30 from 26.4 mt. “It is unlikely that the companies will rush to import sugar as international prices are very high, but it will catch pace in the coming months,” said an analyst.
The duty-free imports will increase the availability of sugar in the retail markets and bring down prices in the coming months, he added.
The measures taken by the government to bring down the retail sugar prices include doubling the levy quota to 20 per cent of the total output of a company.
The levy sugar refers to a portion of the total production which has to be sold to the government at a discounted price for sale through PDS (public distribution system).
The Government in August imposed stock limit to discourage hoarders. The stock limit will be in force till January.
Besides, the commodity market regulator – orward Markets Commission – in May barred commodity exchanges from launching sugar contracts for futures trading till January. With no signs of fall in sugar prices, the ban is likely to be extended through 2010, said a trader.
Source : Business Line