30 Aug Sugar Stocks Surge by Up to 12% as Government Approves Sugarcane Juice for Ethanol Production

Date: August 30, 2024

In a significant boost to the sugar industry, stocks of major sugar production companies surged by up to 12% today after the announcement from the Indian government about its decision to permit the use of sugarcane syrup and juice for ethanol production.

This step is part of the government’s ongoing efforts to increase ethanol blending in fuel, thereby supporting domestic agriculture and reducing the country’s dependence on imported oil from other countries.

The Ministry of Consumer Affairs, Food, and Public Distribution made the announcement, which was met with widespread approval from industry stakeholders. The decision is expected to strengthen the financial growth of sugar mills, which have been tackling with surplus sugar production and impulsive market prices.

Rise in Sugar Stocks – Impact on the Market

Following the announcement, the stock market shares of leading sugar producers like Shree Renuka Sugars, Balrampur Chini Mills and Dhampur Sugar Mills saw a sharp rise, with some sugar stocks climbing as much as 12% in intraday trading.

The highest rise after the opening bell was recorded by Dalmia Bharat Sugar, whose shares surged 11.98% to ₹495.05 apiece on the National Stock Exchange (NSE).

In the first hour of trading, Balrampur Chini Mills increased 6.75% to ₹617.85 per share, whereas Dhampur Sugar Mills rose 6.87% to ₹223.51 apiece on the NSE.

Investors and stakeholders are optimistic about the potential for increased revenues as sugar mills can now provide excess sugarcane for ethanol production, which promises lower stocks and better margins.

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Government’s Ethanol Blending Program

This policy modification is aligned with the government’s ambitious Ethanol Blending Program (EBP), which targets to achieve 20% ethanol blending in petrol by 2025-26. The high availability of ethanol from sugarcane syrup and juice is anticipated to accelerate the program’s progress, lowering the demand for crude oil imports and helping meet climate targets by reducing carbon emissions.

Industry Reactions

Industry analysts and experts have praised the decision as a game-changer for the sugar industry. “This step will significantly enhance the liquidity of sugar mills, allowing them to pay farmers on time and manage their inventories better,” said a spokesperson from the Indian Sugar Mills Association (ISMA).” It also opens up a new revenue opportunities for mills, which could stabilize sugar prices in the long run.”

Conclusion

The decision from the government marks a crucial moment for the sugar sector, with immediate positive market reactions and long-term benefits for the ethanol blending initiative. As sugar stocks continue to rally, the industry is self-assured for stability and growth, with broader associations for the energy and agricultural sectors.

With inputs from PTI