Sugar stocks surged up to 10 percent on Friday, building on Thursday's gains after the centre approved Rs 10,540 crore soft loans to help sugar mills clear cane arrears.
"To help the sugar industry clear its cane dues arrears, the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister, on Thursday, approved the proposal to provide soft loans to the extent of about Rs 7,900-10,540 crore to the sugar industry," an official statement said.
Dharani Sugars, Uttam Sugar Mills, Triveni Engineering & Industries, DCM Shriram Industries, Kesar Enterprise and Dwarikesh Sugar were up in the range of 5 to 10 per cent on the BSE in intra-day trade. In comparison, the S&P BSE Sensex surged 0.5 percent to 36,042 levels.
Balrampur Chini Mills (up 4 percent ) and Dalmia Bharat Sugar and Industries (6 percent ) hit their respective 52-week highs today.
Sugar cane arrears to farmers have crossed Rs 20,000 crore in the current marketing year 2018-19 (October-September). The Centre will bear the interest subvention cost at the rate of 7-10 per cent to the extent of Rs 553 crore to Rs 1,054 crore for one year.
"Surplus production is also estimated in the current sugar season 2018-19 which has affected the liquidity position of sugar mills resulting in building up of cane price arrears of farmers which has reached to the level of Rs 20,159 crore as on February 22, 2019," the statement said.
The decision to provide soft loans comes a fortnight after the Centre raised benchmark selling price of sugar at factory gate by Rs 2 to Rs 31 per kg.
In the recent times, the government has taken a number of steps to address the profitability and liquidity issues of sugar mills, and ease their cash crunch including doubling of the import duty on sugar to 100 percent and scrapping of the export duty
The hike in minimum selling price of sugar by 7 per cent to Rs 31 per kg from Rs 29 per kg was also approved by the union cabinet recently.
Over the past one month, the market price of Uttam Sugar Mills, Magadh Sugar, Dhampur Sugar Mills, Avadh Sugar, Dalmia Bharat Sugar & Industries, Triveni Engineering and Industries, Dwarikesh Sugar Industries, Balrampur Chini Mills have surged over 30 per cent, against 6 per cent rise in the S&P BSE Sensex.
