The Indian stock market witnessed a huge rally in sugar stocks on August 25. Investors booked huge profits in shares of leading companies like Balrampur Sugar, Bajaj Hindustan Sugar and Shree Renuka Sugars. As a result, the share prices of these companies fell by up to 3.5 percent during trading. Behind this sudden decline in the stock market is an important policy decision by the central government. In view of the upcoming Parvan season, the government has brought some relaxation in the sugar import rules, which has completely changed the sentiment of the sugar sector.
Why are investors worried?
As soon as the stock market opened, selling pressure was clearly seen on the shares of sugar companies. The government has made the rules for sugar importers to refine sugar and sell it in the domestic market more flexible. After this news came to light, investors estimated that the supply of sugar in the domestic market would increase rapidly in the coming days. If the supply in the market increases, the sugar price will be under control, which may have a direct adverse impact on the profits of sugar mills. Due to this fear, investors started selling their shares without thinking ahead.
Government’s preparations to control sugar prices:
With big festivals like Ganesh Puja, Durga Puja and Diwali coming up, the demand for sugar for making sweets increases a lot. Sugar prices have been increasing in the domestic market for the last few days. The government does not want our people to bear the brunt of the price hike during the festival. In addition, to prevent black marketing and hoarding in the market, the government has tightened the duty-free import rules, so that adequate supply of refined sugar will be maintained in the market.
New facilities for importers:
On August 20, the government issued a notification allowing duty-free import of 1 million tonnes of sugar through Tariff-Rate Quota (TRQ) till October 31, 2026. Importers were required to refine raw sugar and sell it in the domestic market by October 31. The Directorate General of Foreign Trade has removed this specific deadline. According to the new rules, importers will get a full 2 months from the date of submission of the ‘Bill of Entry’. Traders will get enough time to process the resulting sugar and release it to the market.
Big decision on Advance Authorization:
The government has given another big assurance to importers. Existing Advance Authorization issued under SION E-52 has been allowed to be converted into TRQ scheme for one time. This special rule will be applicable in those areas where sugar has been imported till August 20. It will include refined sugar already produced under it and sugar to be processed from imported raw material. To avail this facility, companies will have to restore the GST exemption taken at the time of import. This necessary step of the government will bring great relief to the common consumer in the upcoming Parvan season, but its impact is being seen in the sugar industry and the stock market in the short term.
