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Government scraps export duty on sugar, sugar stocks gain

The government scraps export duty of 20% on sugar, as per the media reports. The ban on export duty is taken with a view to export excess sugar output in India for sugar season 2017-18. This would also prevent further price erosion of the domestic sugar prices.

ISMA reported sugar output of 25.81mn tonnes as on March 15, 2018, an increase by 47% yoy. The estimated output as per ISMA for sugar year 2017-18 stands at ~29.5mn tonnes, whereas the domestic consumption of sugar is expected to be around ~25mn tonnes.

The removal of export duty would provide an opportunity to Indian sugar mills to export excess output of ~2mn tonnes. Other steps taken by the central government include stock limits on sugar sales by mills at the beginning of February until March 31, 2018, in order to support falling prices of sugar on account of excess supply.

Further, central government, on February 6, 2018, doubled the import duty on raw and refined sugar to 100%. This move was to prevent dumping of heavily subsidized sugar from Pakistan to protect domestic farmers at a time when Indian production is expected to exceed consumption.

Stocks like Balrampur Chini Mills, Sakthi Sugars and Dhampur Sugar Mills rose 2-5% in today’s market session.