Sugar Stocks in Focus: Government Lifted Cap on Sugar Diversion For Ethanol Production

The Indian government has implemented a significant policy change, permitting sugar mills to utilise a wider range of sugar derivatives for ethanol production. This shift announced in a notification on August 29, 2024, is designed to bolster ethanol output and reduce reliance on fossil fuels.

Effective November 1, 2024, sugar mills will be allowed to use cane juice, syrup, B-Heavy molasses, and C-Heavy molasses to produce ethanol for the upcoming Ethanol Supply Year (ESY) 2024-25. This expansion of production capabilities is expected to contribute to the government’s renewable energy goals.

The government has authorised distilleries to purchase up to 2.3 million metric tons of rice from the Food Corporation of India to further stimulate ethanol production. This rice can be used exclusively for ethanol production, providing distilleries with a reliable source of raw material.

To ensure that the policy change does not negatively impact domestic sugar availability, the Department of Food and Public Distribution (DFPD) and the Ministry of Petroleum and Natural Gas (MoPNG) will collaborate to monitor the diversion of sugar to ethanol production. Regular reviews will be conducted to assess the balance between ethanol production and domestic sugar consumption.

This policy adjustment aligns with the government’s broader strategy of promoting sustainable energy practices. By expanding the range of sugar derivatives used for ethanol production and providing additional support to distilleries, the government aims to enhance the efficiency and flexibility of the ethanol supply chain while safeguarding the stability of domestic sugar supplies.

Sugar stocks such as EID Parry (India) Ltd shares rose over 4%, opening at ₹862.05 and touching the day high of ₹875.45. Balrampur Chini Mills shares mounted 6%, and Shree Renuka Sugars shares Ltd zoomed over 7%.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.