MUMBAI: Shares of sugar producers were among the top performers on Wednesday after the government approved an interest free loan package worth Rs 6,000 crore. Analysts said the stock upside could be limited as the move will be enough to result in a turnaround in the debt-laden sugar industry. Empee Sugars stock surged 19% to Rs 14.23. Sakhti Sugars and Mawana Sugars gained 13% each to Rs 146.43 and Rs 28.75, respectively. Rana Sugars and Bajaj Hindusthan rose over 10% each. Stocks such as Bannari Amman, EID Parry and Shree Renuka Sugars gained between 5% and 10%.Declining sugar prices and consistent increase in the fair and remunerative price (FRP) — the minimum price to be paid to farmers for sugarcane decided by the government — have resulted in companies’ operating margins getting squeezed.“This is just a short-term relief for stocks and the industry because companies are under tremendous pressure due to depressed sugar prices with the excess supply and decline in exports,” said Gaurav Dua, head of research, Sharekhan. “However, it will improve the cash cycle of the sugar companies so that they can pay thousands of crore they owe to farmers in cane dues”.As on March 31, 2015, the difference between payment to the farmers to be made as per FRP against sugarcane procured and actual payment made by the sugar manufacturers was estimated at about Rs 19,000 crore.Sugar stocks have underperformed their benchmark indices in the last one year. Shree Renuka, Dhampur, Balrampur and Bajaj Hindustan Sugar have dropped 50-62% in the last one year against 7% gains in the small-cap index. In April, the Indian Sugar Mills Association (ISMA) had said that about 25% of over 500 mills in the country may not be in a position to start crushing operations next marketing year starting October 2015 due to huge debt.The situation worsened when Uttar Pradesh kept the state advisory price (SAP) unchanged during the last three sugar seasons ending 2014-15. Out of the total cane arrears, Uttar Pradesh alone constitutes approximately 50%, which is mainly due to the aggressive cane pricing adopted by the state government.“Inherent operational snags, mounting cane arrears and significant surplus stock have resulted in pricing pressure, lower operating spread and operating losses by a few sugar mills,” said Kalpesh Patel , analyst, CARE Ratings.