Sugar stocks mixed as UP mills decide to suspend operations

Written by fe Bureau | Mumbai | Updated: Aug 6 2014, 08:16am hrs
Shares of sugar manufacturing companies ended mixed on Tuesday, a day after nearly 100 UP sugar mills voiced their decision to suspend crushing operations for the 2014-15 season a move that will further increase supply-side shortfall ahead of the festive season.

Balrampur Chini Mills ended at R73.25 per share, down 0.07%. Shree Renuka Sugars ended up 1.56% at R22.8 per share. Dhampur Sugar Mills ended down 4.22% at R56.75, while Triveni Engineering shares gained 2.25% at R25.25 apiece.

Experts said the crisis has intensified after millowners served a notice to the UP government after the latter failed to deliver on promises. Indian Sugar Mills Association (ISMA) warned that UP mills were still struggling to survive on high cane cost while price arrears are at very high levels.

The millers have alleged they are losing R5.50-6.00 per kg for an erroneous pricing formula adopted by UP state governments, and in return had asked for a price of R9 per kg. More importantly, ISMA demanded that cane prices be linked with sugar prices, in line with the formula suggested by the Rangarajan panel.

While the Centre fixes a Fair and Remunerative Price for sugarcane in India, the state governments have the freedom to set their own price to pay cane farmers.

Experts said India may see a huge shortfall in supply and put upside pressure on inflation. The closing stock of sugar at the end of the 2013-14 season is pegged at 7.5 million tonne (mt), while annual domestic demand stands at 23 mt. India, the second largest producer, produces 24-25 mt of sugar annually, according to the US department of agriculture and official statistics.

Dalmia Bharat Sugar ended down 2.28%, Andhra Sugars ended down 1.38%. Sakthi Sugars ended up 1.03% and KCP Sugar too ended up 0.7%.