Sugar stocks fell as the Finance Minister’s Budget announcement failed to meet the industry’s key priorities. The sector had hoped for approval to use sugar syrup for ethanol production, a higher minimum support price (MSP), and the lifting of export restrictions.
Budget Disappoints Sugar Industry
The sugar sector had high hopes for measures to boost ethanol production and support for cane harvesters. In the run-up to the Budget, most sugar stocks had gained. KCP Sugar and Industries Corp, Shree Renuka Sugars, Balrampur Chini Mills, Rana Sugars, Bajaj Hindusthan Sugar, EID Parry, Triveni Engineering and Industries, and Ponni Sugars (Erode) saw gains of 2-18 percent in the past month.
Stocks React Negatively
Shares of major sugar companies like Avadh Sugar, Bajaj Hindusthan, and EID Parry dropped 2-4 percent following the announcement.
Missed Opportunities for Growth
The sugar industry has been advocating for higher procurement prices for ethanol, support for sugar cane harvesters, and a long-term policy for sugar import-export and ethanol production. The MSP for sugar, initially set at Rs 29 per kg in 2018 and raised to Rs 31 per kg in 2019, is overdue for another upward revision. Although current market prices are higher than the MSP (Rs 36 in Maharashtra and Rs 39 per kg in UP), raising the MSP would establish a baseline and boost investor confidence, according to a Centrum Broking report.
