Sugar Stocks Fall Up To 5% After Duty-Free Import Move

Sugar stocks came under sharp selling pressure in early trade on Friday after the government allowed duty-free imports of 1 million metric tonnes of raw sugar, seeking to boost domestic supplies and contain record-high prices ahead of the festival season.

Dalmia Bharat Sugar was the top loser among sugar stocks, falling 5.47% to ₹480.30. Dwarikesh Sugar Industries declined 4.32% to ₹52.99, while Balrampur Chini Mills dropped 4.15% to ₹735.25. Triveni Engineering & Industries fell 3.82% to ₹288.60.

Uttam Sugar Mills declined 3.07% to ₹325.90, while EID Parry fell 2.22% to ₹792.30. Dhampur Sugar Mills was down 1.99% at ₹185.99.

Avadh Sugar & Energy slipped 1.53% to ₹802.20, Bajaj Hindusthan Sugar lost 1.41% to ₹23 and Shree Renuka Sugars declined 1.03% to ₹25.86. Simbhaoli Sugars was unchanged at ₹7.89.

Why Sugar Stocks Are Falling

The government on Thursday allowed duty-free imports of 1 million metric tonnes of raw sugar until October 31 as it seeks to increase supplies and rein in record-high domestic prices. India normally imposes a 100% duty on sugar imports.

The move marks India's first significant sugar imports in nearly a decade and comes after tightening supplies pushed domestic prices sharply higher. Sugar prices have risen nearly 40% over the past two months amid lower production, according to Reuters.

The timing of the import window is significant as sugar consumption typically rises during the festival season, when demand for sweets and confectionery increases and large consumers build inventories.

Port-based sugar refineries, which typically import raw sugar duty-free for refining and subsequent export, can apply for allocations under the 1-million-tonne quota. The government will also allow refined sugar produced from raw sugar already imported by these refiners to be sold in the domestic market until the end of October.

Import Move Could Pressure Sugar Prices

The duty-free imports could increase domestic sugar availability and temper prices, potentially limiting the benefit of elevated realisations for sugar producers.

The government had earlier this week also tightened stockholding restrictions for large consumers, ordering dealers consuming more than 10 metric tonnes a month to hold inventories equivalent to no more than 15 days of consumption. The restriction will apply from September 1 through November 30.

The latest move comes after sugar stocks had rallied sharply over the previous two sessions on expectations of stronger realisations amid tight domestic supplies and record prices.

The rally accelerated on Thursday, with Balrampur Chini Mills surging 18%, Dwarikesh Sugar Industries climbing nearly 14% and several other sugar stocks gaining 7-10%.

Global Sugar Prices React

While the import decision is expected to increase domestic availability, benchmark global sugar prices moved higher after India's announcement, reflecting expectations of increased demand from one of the world's major sugar markets.

White sugar futures in London and raw sugar futures in New York jumped as much as 4% following the government's decision.

The policy intervention therefore creates a mixed outlook for the sector where domestic sugar producers could face pressure from increased supplies and lower realisations, while global prices may find support from India's return to the international market.