Sugar stocks displayed a mixed performance on February 1 as Finance Minister Nirmala Sitharaman omitted any reference to concessions sought by the sugar industry in her address.
While EID Parry recorded an increase of over 5 percent in its trading, Balrampur Chini Mills, Shri Renuka Sugars, and Bajaj Hindusthan all saw declines of up to 3 percent.
In December 2023, the government temporarily prohibited and later permitted the utilization of sugarcane juice and B-heavy molasses for ethanol production. However, the diversion of sugar was capped until the conclusion of the 2023-24 sugar season, which ends in September of the current year.
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The government also recently introduced an incentive for ethanol produced from maize, indicating its reluctance to redirect significant amounts of sugarcane for ethanol production. The diversion of sugarcane sucrose for ethanol could result in an increase in sugar prices, an outcome undesirable for the government, especially in an election year.
During the pre-Budget survey, the Indian Sugar Mills Association (ISMA), a lobbying group representing sugar producers, expressed its desire for the government to permit an extra 10-12 lakh tonnes of sucrose diversion for ethanol production. They argued that even with the allowance for additional sugar to be used in ethanol production, the closing sugar balance would still be adequate for the initial months of the upcoming season.
Additionally, they emphasized that the sugarcane crop exhibited greater efficiency in terms of water, nutrient, and land use, as well as carbon sequestration, in comparison to maize. Consequently, they argued that sugarcane deserved greater support from the government.
The lobbying group also urged the government to increase the procurement cost of ethanol derived from sugarcane juice/syrup, B-Heavy Molasses, and C-Heavy Molasses.
Moreover, the industry sought an increase in the minimum support price (MSP) of sugar, proposing a raise to INR 38 per kg from the existing INR 31 per kg.
The government set the minimum support price (MSP) for sugar at INR 31 per kg in February 2019, and this rate had remained constant since. In contrast, the fair and remunerative price (FRP), which sugar mills are obligated to pay sugarcane farmers, increased from INR 2,550 per tonne in 2017-18 to INR 3,050 per tonne for the 2022-23 period.
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