Investors are hurriedly buying shares of sugar stocks in early trade on government’s impetus for the industry. Sugar stocks like Balrampur Chini , Bajaj Hindusthan , Shree Renuka Sugars rallied 7-8 percent on Thursday as the government has fixed a price of Rs 48.50-49.50 per litre for procurement of ethanol for blending with petrol, a rate much higher than the price oil companies presently pay to buy the sugarcane extract.
Abinash Verma, DG, Indian Sugar Mills Association (ISMA) says in a euphoric note that almost all private sugar companies will benefit from it as sugar industry is likely to see better realisations with new price. He also adds that procurement may increase up to 10 percent If supplies increase.
“Indian revenue may rake in nearly Rs 5,000 crore after the new rate is implemented. Oil marketing companies (OMCs) have been paying Rs 47.50 at oil depot for procurement,” Verma says in an interview to CNBC-TV18.
The Cabinet Cabinet Committee on Economic Affairs (CCEA) fixed the delivered price of Ethanol in the range of Rs 48.50 per litre to Rs 49.50 per litre, depending upon the distance of sugar mill from the depot/installation of the public sector oil marketing companies (OMCs), an official statement said.
For the distance ranging from 0-100 kms price is fixed at Rs 48.50 per litre, for 101-300 kms price will be around Rs 49.00 per litre and for the distance more than 300 kms price will be around Rs 49.50 per litre, the statement added.
“The rates proposed would be delivered price at depot location and inclusive of all Central and State taxes, transportation costs, etc which would be borne by the Ethanol suppliers,” it added.
OMCs will incorporate the “Supply or Pay” clause duly backed up with bank guarantee in their supply agreement with ethanol suppliers.
Besides that, OMCs will also sign memorandum with the State Governments for a comprehensive system for uninterrupted inter-depot transfer of Ethanol within a State. This may include annual excise permits to OMCs for movement of Ethanol and other relevant measures, it said.
Oil firms presently pay about Rs 29/litre for ethanol. The Food Ministry had said that ex-sugar mill price of ethanol is around Rs 42.02 per litre. For ethanol suppliers, the landed cost of ethanol at the OMCs depots would be around Rs 49 per litre.
In November 2012, the government had mandated compulsory 5 percent blending of ethanol in petrol but the programme has not extended beyond certain centres because of supply and pricing issues. The procurement price of ethanol was earlier decided by oil companies and the suppliers of ethanol.
|Company||Last Price (Rs)||% Change|
|DCM Shriram Ind||126||4.83|
|KM Sugar Mills||4.25||2.66|
|Oudh Sugar Mill||21.75||5.07|
|Ugar Sugar Work||10.11||2.02|
(With inputs from PTI)