Sugar stocks experienced an 8 percent surge in early trading on December 18, following a recent order from the food ministry that lifted the ban on using sugarcane juice to produce ethanol.
The ministry has granted approval for the use of both sugarcane juice and B-heavy molasses in the production of green fuel for the supply year 2023–24.
At 9:17, Balrampur Chini Mills and Shree Renuka Sugars witnessed an increase of approximately 7.5 percent, while Dalmia Bharat Sugar showed a gain of 6.5 percent. Triveni Engineering and E I D-Parry (India) also experienced rises of around 5 percent each.
On December 5, the ministry issued a directive to all sugar mills and distilleries, stating that oil marketing companies (OMCs) would provide a revised allocation of ethanol derived from sugarcane juice and B-heavy molasses for the 2023–24 supply year to each distillery.
From December 6 to the market close on December 16, Balrampur Chini Mills saw a decline of 17.5 percent in its shares, Dalmia Bharat Sugar experienced a loss of 11.13 percent, Shree Renuka Sugars decreased by 7.6 percent, and Triveni Engineering recorded a drop of 12.2 percent.
The government’s decision to restrict ethanol production from sugarcane follows a period of irregular monsoon in India, causing damage to sugarcane crops. This led the world’s second-largest sugar producer to extend export restrictions beyond October 31.
Last month, the Indian Sugar Mills Association (ISMA), a trade organization representing sugar producers, projected an 8 percent decline in the country’s sugar production to 33.7 million tonnes (excluding diversion towards ethanol) in the marketing year 2023-24. This outlook was attributed to reduced rainfall in crucial sugar-producing states, which could adversely impact yields.
“The diversion into ethanol has been quite meaningful over the past quarters and margin accretive for sugar companies. The government’s ethanol clampdown may increase sugar production solely but the core output has not been as lucrative as ethanol diversion. Most of the consistent run-up seen across sugar stocks was on the back of the money made through ethanol diversification,” said Nirav Karkera, head of research, Fisdom.
