Balrampur Chini, Dhampur Sugar: Here’s how sugar stocks are faring after excise duty waiver on ethanol-blended petrol

Sugar stocks such as Balrampur Chini Mills, Triveni Engineering and Industries, Dhampur Sugar, and a few more were trading higher on Thursday, June 11, after the government waived excise duty on variants of ethanol-blended petrol.

According to the finance ministry notification, the duty waiver is applicable on E22, E25, E27, and E30 variants of petrol. The ministry further said excise duty will be ‘nil’ on petrol with a 22%, 25%, 27%, and 30% ethanol blend.

In another notification, the government exempted the same categories of ethanol-blended petrol from the additional duty of excise levied as road and infrastructure cess, with the applicable rate fixed at nil.

The Revenue Department also amended the Agriculture Infrastructure and Development Cess-related notification to provide similar concessional treatment for petrol blended with 22-30% ethanol.

The exemptions will apply to fuel blends comprising 78% petrol and 22% ethanol, 75% petrol and 25% ethanol, 73% petrol and 27% ethanol, and 70% petrol and 30% ethanol.

The move comes weeks after the Bureau of Indian Standards (BIS) notified fuel specifications for E22, E25, E27, and E30 blends, establishing the technical standards required for their use in petrol-powered vehicles.

Reason behind the exemption

The excise duty waiver is aimed at encouraging customers to move towards ethanol-blended petrol. The move comes against the backdrop of petrol and diesel prices rising by nearly ₹7.50 a liter in the second half of May.

The government had in March cut excise duty on petrol and diesel by ₹10/liter, foregoing over ₹1 lakh crore of annual revenue. This was aimed at shielding domestic customers from the surge in global crude oil prices amid the West Asia war.

Here’s how sugar stocks are performing

Dhampur Sugar shares climbed 4.36% to an intraday high of ₹147.50, while Dwarikesh Sugar advanced up to 4.8% to reach ₹45.68 apiece on Thursday.

Shares of Balrampur Chini Mills rose 2.83% to touch an intraday high of ₹551.75, and Triveni Engineering & Industries gained 2.86% to hit its day’s high of ₹383.95 during the session.

Praj Industries shares added 1.97% to reach an intraday high of ₹350.55 apiece on Thursday.

How does ethanol help sugar stocks?

Ethanol mixed with petrol in a 90:10 ratio helps reduce tailpipe emissions, resulting in fewer carbon emissions. Due to these benefits, the government has made it mandatory to use this ratio in blended fuel. Further, they are planning to increase this ratio from 90:10 to 90:20 in the near future.

This would skyrocket the ethanol demand and its prices, thus propelling ethanol and sugar stocks. It will provide a tremendous opportunity not only for sugar manufacturers and alcohol producers but also for common investors of ethanol stocks in India.

India is one of the largest producers of ethanol in the world and continues to increase its production capacity over recent years.