Sugar stocks gain as government likely to pay Rs55 per tonne to cane farmers
This move is to subsidise sugarcane prices and to aid sugar mills in the midst of low domestic and global sugar prices.
The government is likely to provide support, in financial terms, to sugarcane farmers for produce sold to the sugar mills, as per media reports. This move is to subsidise sugarcane prices and to aid sugar mills in the midst of low domestic and global sugar prices. Stocks of Balrampur Chini and Bajaj Hindustan are up by more than 5% each in today’s trade session.
The expected amount of payment is Rs55 per tonne to the cane farmers. Sugar mills are required to pay fair remunerative prices (FRP) to the farmers. However, on account of subdued sugar prices, outstanding dues towards farmers for sugarcane purchase is piling up, leading to working capital issues.
The move would aid sugar mills’ net operating margins and working capital. It would ensure partial payment to farmers on the overall dues pending for sugarcane produce.
In the month of March, 2018, the government also scrapped export duty on sugar of 20% and made it compulsory for mills to export at least 2mn tonnes of sugar. This would enable sugar mills to dump excess sugar output in the global markets.