‘Government is thinking in the right direction’

The liquidity-starved sugar industry has welcomed the measures announced on Monday by the government, which, it expects, will go a long way to improve its lot.

Initiatives such as the hike in import duty from 15 per cent to 40 per cent, hiking of ethanol (a by-product of sugar manufacturing) blending in petrol from 5 per cent to 10 per cent as also the extension of export incentives to September 2014 are expected to aid the beleaguered industry.

“It is most welcome, and we are very happy that the government has come forth with this relief,” Ram Thiagarajan, Chairman and Managing Director, Thiru Arooran Sugars, told this correspondent. “Hopefully, it will help stabilise and increase sugar prices,” he said.

He felt that it was important to infuse more liquidity into the industry as there was a mismatch between cane prices and sugar cost for the last three years. “This has strained liquidity considerably,” Mr. Thiagarajan said.

“It is absolutely logical that these steps were announced,” Vivek Saraogi, Managing Director, Balrampur Chini Mills, told The Hindu. “And it shows that the government is thinking in the right direction. Clearly, we are in a surplus situation, and export incentives will help.”

Sugar mills in Uttar Pradesh, which account for almost a third of the total production, are losing money as cane price is pre-determined. “States like Maharashtra have passed an Act and brought in a formula but the problems in Uttar Pradesh persist,” Mr. Saraogi said, adding that the new government measures would shore up prices. “It all depends on how sugar prices react now.” According to Amar Ambani, Head of research at IIFL, “all these measures will boost the sector in the near-term though we will retain our cautious view on stocks.”

On the Bombay Stock Exchange, on Monday, shares of sugar majors reacted positively. Bajaj Hindustan moved up by 9.87 per cent to Rs.29.5, Balrampur Chini Mills by 7 per cent to Rs.85.15, Shree Renuka Sugars by 10.32 per cent to Rs.29.4 and Thiru Arooran Sugars by 3.9 per cent to Rs.79.9.

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