Shares of domestic sugar companies surged on Monday after the government decided to hike import duty on the sweetener to prevent cheap inflows, and extend a subsidy on exports to help local mills clear cane dues of Rs 11,000 crore to farmers.
Union agriculture minister Ram Vilas Paswan told reporters in New Delhi that the tariff on imports will be increased to 40% from 15%, and cash incentives of Rs 3,300 per tonne on raw sugar exports will be extended until September. The government will increase blending of ethanol with gasoline to 10% as soon as mills clear farmer dues.
Bajaj Hindusthan Ltd, the largest sugar producer in the country, saw its shares surge 9.9% to Rs 29.30, while the shares of the second-largest producer Balrampur Chini Mills jumped 6.9% to Rs 84.80. Shree Renuka Sugars Ltd, the largest refiner in the country, saw its shares shoot up 10.3% to Rs 29.40.
Triveni Engineering and Industries shares rose 9.6% to Rs 31.50 while Dhampur Sugar Mills stock moved up 7.8% to Rs 65.60.
India had earlier announced the subsidy for raw sugar exports in February to help mills clear dues to farmers after stockpiles jumped to the highest level in five years and weakened prices. Exports took a dip after local prices rose above global rates.
Indian Sugar Mills Association's director general Abinash Verma said in an e-mailed statement, "The decisions would benefit the industry and improve the liquidity of sugar mills, which would help the industry clear the pending payments to the cane farmers at the earliest."
He said there is also a need to improve the sugar prices to allow mills to at least cover their cost of producing sugar.
Hike in import duty to 40% will ensure that sugar from other countries doesn't find its way into India. The measures may also boost domestic sugar prices.
Apart from the measures on import/export duties, the government has also announced that they would allow mills to access Rs 4,400 crore in interest-free loans from banks to pay farmers' dues, Bloomberg said quoting a government official.
Sugar output in the country fell to 24.2 million tonne in the season ending September 30 from 25.1 million tonne a year earlier, according to the mills' association. India's domestic consumption is likely to be at 24 million tonne this crop season.
—With inputs from Bloomberg