Sugar stocks on fire after removal of curbs

Stocks

oi-Sunil

By Sunil Fernandes

Published: Friday, April 5, 2013, 9:46 [IST]

Sugar stocks rallied after the Cabinet Committee on Economic Affairs (CCEA) last night approved a proposal to abolish the levy-sugar mechanism.

On Thursday the government decided that Indian companies would no longer be forced to sell sugar to the government at a discount and there will not be any restriction on the quantity they can sell in the open market.

Among the sugar stocks that gained were Bajaj Hindustan which jumped 8 per cent, Balrampur Chini rose 9 per cent, Shree Renuka Sugars gained 8 per cent. Other sugar stocks that climbed were Sakhthi Sugars and Dhampur Sugars.

"The regulated release mechanism may be dispensed with immediately. Obligation of levy on sugar mills be done away with for sugar produced after September 2012," Food Minister K V Thomas told reporters after the meeting.

Under the regulated release mechanism, the Centre fixes the sugar quota that can be sold in open market. Of late, this mechanism has been relaxed and the quota is now being released on half-yearly basis from the earlier monthly-wise.

In levy sugar system, millers are required to contribute 10 percent of their output to the Centre for running ration shops at cheaper rate, costing industry Rs 3,000 crore a year. Thomas further said the requirement of sugar for ration shops may be procured by states through open market through transparent system.

"The Government of India will bear the difference between the ex-mill price of Rs 32 per kg and retail sugar price of PDS at Rs 13.50 per kg," Thomas added.

The government will continue to fix fair and remunerative price of sugarcane. The minimum distance criteria between two mills will also continue, among other controls.
Analysts say that sugar companies are likely to benefit immensely after this long due measure and sugar stocks could soar further in the days to come.

GoodReturns.in with inputs from PTI