Sugar stocks rise on sweet deal

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Published: August 14, 2015 12:13:43 AM

Shares of sugar companies rallied as the Cabinet Committee on Economic Affairs cleared a R6,000-crore soft-loan scheme for sugar mills...

Shares of sugar companies rallied as the Cabinet Committee on Economic Affairs cleared a  R6,000-crore soft-loan scheme for sugar mills ahead of the crushing season — a move that will enable mills to pay a part of their Rs 14,000-crore dues to farmers. The Mawana Sugars scrip surged 8.76%, while Dhampur Sugar Mills, Sakthi Sugars and Bajaj Hindustan advanced 1.9-2.8% each, as the government hiked the import duty on sugar to 40%, abolished duty-free imports and slashed the export obligation time to six months from 18 months under the advance authorisation scheme.

The scheme, however, would be applicable to only those mills that have cleared 50% of their outstanding arrears as on June 30. The government has offered a one-year moratorium on interest for the soft loan, which translates into around R600 crore for the exchequer.  Unlike other industries, sugar mills do not operate throughout the year. They usually function for four to seven months during the crushing season. The mills and its workers remain idle during the remaining period of the year, leading to financial distress for the industry. Although farmers and capital markets welcomed the move, the industry body felt the soft loan would not help the mills much.


The Indian Sugar Mills Association (ISMA) said sugar mills with poor finances would not have access to the soft loan as majority of them have not cleared dues to farmers. The NDA government had approved a subsidy to export raw sugar earlier this year.

Yet it failed to boost exports. Experts said ample supply and populist policies of state governments to raise MSP  have played spoilsport.

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