Sugar stocks trade mixed as FM give a miss to sector in Budget speech

An industry body had wanted the government to allow additional 10-12 lakh tonnes of sucrose diversion towards ethanol production.

Sugar stocks traded mixed on February 1 after the Finance Minister Nirmala Sitharaman did not mention any concession demanded by the sugar industry in her speech.

While EID Parry was trading with gains of over 5 percent, Balrampur Chini Mills, Shri Renuka Sugars and Bajaj Hindusthan fell as much as 3 percent.

In December 2023, the government allowed – after banning briefly – utilisation of sugarcane juice as well as B-heavy molasses to produce ethanol but capped the diversion of sugar till the end of the 2023-24 sugar season, which is in September this year.

Government had also recently announced an incentive for ethanol made from maize, signalling that it does not favour diverting large quantities of sugarcane to produce ethanol. Diversion of sugarcane's sucrose for ethanol production can lead to rise in sugar prices, which won't be an outcome the government desires in an election year.

In the pre-Budget survey, Indian Sugar Mills Association (ISMA), a lobby body of sugar producers, had told Moneycontrol that it wanted the government to allow additional 10-12 lakh tonnes of sucrose diversion towards ethanol production. They said that, even after allowing additional sugar for production of ethanol, closing sugar balance would be sufficient for a couple of months into the next season.

They also pointed out that the sugarcane crop was more efficient in terms of water/nutrient/land use or carbon sequestration, compared to maize, and therefore deserved to be supported more by the government.

The lobby body had also wanted the government to raise the procurement cost of ethanol produced from sugarcane Juice/ Syrup, B-Heavy Molasses and C-Heavy Molasses.

Besides, that the industry wanted the government to raise the minimum support price (MSP) of sugar to be increased to Rs 38 per kg from Rs 31 per kg.

The government had fixed MSP of sugar at Rs 31 per kg in February 2019 and the price had remained unchanged since then. However, the fair and renumerative price (FRP)--which the sugar mills are mandated to pay sugarcane framers--has gone up from Rs 2,550 per tonne in 2017-18 to Rs 3,050 per tonne for the year 2022-23.