Renuka Sugar to Balrampur Chini: Why sugar stocks in India are nosediving today?

Stock market today: On account of market buzz about the rise in the input cost of sugar companies in the future, most of the sugar stocks in India witnessed high selling pressure during morning deals. Sugar major Balramput Chini share price today opened downside at ₹375 apiece on NSE and went on to touch an intraday low of ₹372 within a few minutes of the opening bell, logging nearly 2.50 percent dip on Thursday session.

Shree Renuka Sugars share price opened at ₹50 apiece and went on to touch an intraday low of ₹47.85 per share level, recording around a 3 percent dip against its Wednesday close of ₹49.60 per share.

Shares of Dwarikesh Sugar, Rana Sugars, Dalmia Bharat, Triveni Engineering and Industries, KCP Sugar and Industries Corporation, Mawana Sugars, etc. also came under the sell-off heat during Thursday morning deals and slipped into the red territory by over 1 percent intraday loss.

Why sugar stocks are under pressure?

Highlighting the reason for the dip in sugar stocks in India, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “Sugarcane shares are under pressure today as the market is expecting a rise in input cost of the sugar maker companies after the rise in FRP of sugarcane.”

Gorakshkar said that the Cabinet Committee on Economic Affairs in its meeting on Wednesday has raised Fair and Remunerative Price (FRP) of sugarcane for Sugar Season 2024-25. This is expected to put sugar maker companies under pressure as they will have to borrow sugarcane at a higher price in the above-mentioned sugar season.

The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi approved the FRP of sugarcane for Sugar Season 2024-25 at ₹340/quintal at sugar recovery rate of 10.25%. This is historic price of sugarcane which is about 8% higher than FRP of sugarcane for current season 2023-24. The revised FRP will be applicable with effect from 1st October 2024.

At 107% higher than A2+FL cost of sugarcane, the new FRP will ensure prosperity of sugarcane farmers. It is noteworthy that India is already paying the highest price of sugarcane in the world and despite that Government is ensuring the world’s cheapest sugar to domestic consumers of Bharat. This decision of Central Government is going to benefit more than 5 crore sugarcane farmers (including family members) and lakhs of other persons involved in sugar sector. It re-confirms fulfilment of Modi ki Guarantee to double farmers’ income.

With this approval, sugar mills will pay FRP of sugarcane at ₹340/quintal at recovery of 10.25%. With each increase of recovery by 0.1%, farmers will get additional price of ₹3.32 while the same amount will be deducted on reduction of recovery by 0.1%. However, ₹315.10/quintal is the minimum price of sugarcane which is at recovery of 9.5%. Even if sugar recovery is lesser, farmers are assured of FRP at ₹315.10/quintal.

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