Sugar stocks settler higher after report says govt may allow use of more sweetener for ethanol

Shares of sugar manufacturing companies settled higher at the stock markets on April 9 after news agency Bloomberg reported, citing sources, that the government may allow sugar mills to use more of their output for ethanol production.

The government may permit sugar mills to divert an additional 800,000 tonnes of sugar output this year for making ethanol, the report said, citing a person who is privy to the development. This would be in addition to the 1.7 million tonnes of sugar already allowed to be used for the green fuel, it added.

An official reaction to the news was awaited by the time the preliminary reports emerged.

The news, which came shortly before the closure of the market hours, led to a jump in the sugar stocks. Balrampur Chini Mills, one of the largest sugar manufacturers, soared by around 2% after the report was out at around 3 pm. It settled at ₹392 apiece on the National Stock Exchange (NSE), higher by 1.49% as against the previous day’s close.

The jump was higher for Shree Renuka Sugars, which climbed by 7% to close at ₹45.95 apiece, and Dhampur Sugar Mills which ended 2.76% higher at ₹236.75.

While ethanol production remains in focus, the government had, on December 7 last year, banned the use of sugarcane juice for producing the biofuel. The move was seen as a likely bid to check the sugar grain prices at a time when inflation was an area of concern.

The ban, however, was reversed on December 16 with the sugar mills being allowed to use the juice as well as B-heavy molasses to produce ethanol. The reversal, said experts, indicated that the government did not want to compromise on its ethanol blending target while battling food inflation.

As of November 30, 2023, the ethanol production capacity in the country stood at about 1,380 crore litres out of which about 875 crore litres was molasses-based and about 505 crore litres was grain-based, as per the official data.

Notably, the Centre has asked Oil Marketing Companies (OMCs) to sell petrol blended with ethanol, and has fixed a target of 20% blending of ethanol with petrol by 2025.

Meanwhile, the country’s overall sugar output is estimated to have reached 34 million tonnes in fiscal year 2023-24, compared with a forecast of 33.05 million, according to the Indian Sugar and Bio-energy Manufacturers Association. The official production numbers for the entire fiscal year are yet to be released.