Government raises import duty on sugar, share prices not to be impacted

To discourage cheap imports of sugar, the government has raised the import duty on the sweetener to 40 per cent from 25 per cent.

Market experts believe the move will support the falling sugar prices in the country.

Kunal Shah, head of commodities research, Nirmal Bang Commodities, says, "After the hike in the import tax, we believe sugar price will increase by Rs 100 per quintal in the next 3-4 months."

In the past one year, prices of sugar plunged nearly 19 per cent to Rs 2,725 per quintal on April 28. The commodity was trading at Rs 3,353 on the same day a year ago.

The measures will significantly improve the adverse price sentiments in respect of sugar and would improve the liquidity in the industry, facilitating the clearing up of arrears of cane dues to farmers, the government said in a statement on Wednesday.

As on 31 March 2015, the cane dues arrears stood at  Rs 20,099 crore.

The government also slapped the tax on imports of raw sugar that refiners turn into whites, or refined sugar, to sell in world markets.

Equity market experts believe, the rise in import duty will not change the long term fortune of sugar industry. Pankaj Pandey, head of research, ICICI Securities, says, "Short term trading interest might revive in sugar stocks. However, the long term outlook for the industry will remain bleak. Hence, investors should stay away from sugar stocks."

Among the major sugar stocks on the basis of market capitalisation, the share price of EID Parry (India), Bajaj Hindusthan, Shree Renuka Sugars, Balrampur Chini Mills and Bannari Amman dipped 1.17 per cent, 9.12 per cent, 42.7 per cent, 19.39 per cent and 9.30 per cent to Rs 160.20, Rs 17.63, Rs 12.69, Rs 46.95 and Rs 839, respectively, in the past one year till April 28.

Post announcement, the share price of Bannari Amman Sugars, and EID Parry (India) surged 7.27 per cent and 3.80 per cent to Rs 900 and 164, respectively. However, Balrampur Chini Mills was trading Rs 46.30, around 1.4 per cent lower than its previous close.

(With inputs from agencies)