Sugar stocks weather exports curbs

Sugar stocks weather exports curbs

The stock prices of the major sugar companies have not been impacted much by the recent government’s decision to restrict sugar exports beyond October 31, presumably because the decision was largely anticipated by the investors.

The stock prices of Triveni Engineering and Industries rose by 1.61% to Rs 387.97 on Friday against Rs 381.8 on October 6. However, shares of Balampur Chini, Shree Renuka Sugar and Dhampur Sugar, declined by 1.77%, 2.69% and 4.72% respectively in the last fortnight.

“Given the possibility of a decline in sugar production this year, we were expecting that the government to take cautious approach in allowing shipment of sweetener,” Atul Chaturvedi, executive chairman, Shree Renuka Sugar, told FE.

Chaturvedi said that although given the record level of global sugar prices, exports would have beneficial yet it could have caused huge spike in domestic prices of sweetener hitting the consumers

Trade sources said that industry was anticipating the government to continue with existing restrictions on sugar exports.

“Our primary objective is to first cater to the domestic consumption followed by sugar diversion towards ethanol production and remaining available sugar be exported to keep a balance among all the stakeholders,” according to a ISMA note.

“Restrictions on export of sugar – raw, white, refined and organic are extended beyond October 31, 2023 till further order,” Directorate General of Foreign Trade (DGFT) stated in its notification on wednesday.

The food ministry has recommended that sugar exports be put under the ‘restricted’ category beyond October 31, a move that signals a likely multi-year low in shipments of the sweetener, and a narrowing gap between domestic production and consumption.

Sources said following the assessment of sugar production this month, the food ministry would review the domestic supply situation before taking a call on granting export quota for 2023-24 sugar season (October-September).

A key reason for the estimate of the lack of surplus for exports in the just-started season (2023-24) is the sharp rise in blending of ethanol into petrol, which is set to reach 12% by December-end.

Of the estimated sugar production of 31 MT in the current year, 27 MT is expected to be required for domestic consumption as sweetener. That means after earmarking 4.5 MT for ethanol production, hardly any sugar will be available for exports. The government is keen to ensure that domestic sugar prices don’t spiral before the peak festive period.

Last year, the government announced to impose restrictions on sugar exports from June 1, 2022, which was later extended till October 31, 2023.

India exported 6 million tonne (MT) of sugar in the last sugar season (October-September 2022-23), and a record 11 MT in the year before, when no quota restriction was imposed.