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Sugar Stocks Jump as Pawar Proposes Ending Controls Amid Rebound in Output
Bajaj Hindusthan Ltd., India’s biggest sugar maker, and its domestic rivals surged in Mumbai after the farm minister said the time is right to scrap controls on the producers amid forecasts for a rebound in the country’s output.
Bajaj advanced as much as 6.6 percent to 123.2 rupees, the highest price in two months, and Balrampur Chini Mills Ltd., the second-biggest, rose 5.7 percent to 88.8 rupees. The two stocks were among the biggest gainers on the BSE200 Index today. Shree Renuka Sugars Ltd., the largest refiner, rose 5 percent to 72.5 rupees, a three-month high.
Lifting controls would permit mills to sell their entire production at market prices, boosting earnings at a time when global supplies are forecast by Fortis Bank Nederland and VM Group to exceed demand by 5.64 million metric tons this season. The government sets the floor price for cane, the quantity of sugar to be sold in the market every month and buys 20 percent of the output at below-market costs for resale to the poor.
“Decontrol will help the market determine prices, which will be good for the industry,” said Arhant Jain, executive president for finance at Dhampur Sugar Mills Ltd. “Demand and supply forces will work.”
Last year, the government ended an import tax on sugar and asked producers of cookies and beverages to pare their stocks to bolster domestic supplies as reduced cane planting and a drought slashed production. Limits on supplies held by bulk users will be raised and a duty on overseas purchases is being “actively considered,” Minister Sharad Pawar told a conference today.
“The time has come to give a second thought on government control” because production is expected to increase, he said. Pawar didn’t say when the restraints would be lifted.
Production in the country, the biggest consumer, may be 25 million tons in the year starting Oct. 1, from 18.7 million tons estimated this season, the Indian Sugar Mills Association said July 7. Output may total 23 million tons, matching demand, a government official said last month.
Stockpiles will jump 53 percent in the year ending Sept. 30, according to the association. Mills will end the season with 4.9 million tons, compared with 3.2 million tons a year earlier, the group said June 14.