In chat with Anil Singhvi, expert Varinder Bansal decodes the impact of subsidy on sugar sector
Varinder Bansal, Founder of Omkara Capital said that Sugar stocks should be bought if there is a fall in their share price. He said that the subsidy is been given for last 3 to 4 years. He said the subsidy amount was Rs 8.32 per kilo in 2018-19, Rs 10.44 per kg in 2019-2020 and Rs 6 per kg in 2020-21
Zee Business Managing Editor Anil Singhvi said that the subsidy on Sugar sector has been reduced to Rs 4000 from Rs 6000. He said that the sugar prices are soaring across the globe.
Varinder Bansal, Founder of Omkara Capital said that Sugar stocks should be bought if there is a fall in their share price. He said that the subsidy is been given for last 3 to 4 years. He said the subsidy amount was Rs 8.32 per kilo in 2018-19, Rs 10.44 per kg in 2019-2020 and Rs 6 per kg in 2020-21. Investors need to understand that the price per kg has already been reduced from Rs 10.44 to Rs 6 last year.
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Bansal said that Government did mention when they started the export subsidy, that subsidy amount will be reviewed at regular intervals depending on how much sugar is sacrificed for ethanol. Bansal said that the excess supply of sugar is to be removed in such a way that the demand and supply matches closely. So, the Government said how much they can export and how much they can sacrifice for ethanol. He said that Ethanol diversion is good and fast from sugar. So, government has decided to reduce the benefit as sugar companies are benefiting.
Bansal said that in 2023 export subsidy will not be given at all. Considering the subsidy amount of Rs 4 and global prices of sugar near $17, the realization amount is Rs 31.4 which is much better than the domestic prices. He said sugar companies will still report profit despite the subsidy amount being reduced.
Bansal said that export quota for 2020-21 was 6 mn ton. Out of this, 5.7 mn ton is already done. This means that the reduced subsidy amount will be on 0.3 mn ton which is not a matter of concern, explains Bansal.
Bansal said it is important to understand that how much production of ethanol is happening from sugar. He said 2 to 2.5 trn ton sugar will be sacrificed this year and 3 to 3.5 trn ton will be done next year. This should be focus rather than the reduction in the subsidy amount. There will be no financial impact on any Sugar companies, explains Bansal.
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