Sugar stocks jump up to 15% after govt allows mills to divert sugar for ethanol

The sugar sector surged over 15% on Monday after media reports said that the government has decided to allow sugar mills to divert up to 1.7 million metric tons of sugar for ethanol production. The move comes on the back of curbs on the diversion of sugar for ethanol production as part of efforts to ensure sufficient supplies in the local market.

The top gainer from the pack was Ugar Sugar Works, which shot up nearly 15% in the early trade. Others including Triveni Engineering & Industries, Balrampur Chini, Shree Renuka Sugars, Rana Sugar, Dwarikesh Sugar, and Eid Parry (+3.49%) gained up to 6.16% around 10:10 am.

The government’s latest move is to reduce disruptions in its ambitious biofuel program, Reuters reported.
On Friday, the government opted to permit the diversion of cane juice and B-heavy molasses for ethanol production, capping it at 1.7 million metric tons for the 2023/24 marketing year started on October 1, this report said citing industry sources and government officials.

“A quota will soon be allocated for sugar mills and distilleries,” said a senior government official, who preferred not to be named, following official rules. The available sugar supply would still be adequate to meet local demand, even with the diversion of sucrose for ethanol production, the official added.

“I think this gives some relief to the industries, particularly those industries who have invested based on the government policy and program, ethanol branding program to produce ethanol out of B-heavy as well as syrup,” Prabhakar Rao, President, ISMA told ET Now.

Roughly it is about one-third of the quantity offered, he said, adding that the quantity that was offered in the tenders as quoted by the OMCs was about five and a half million tons. The problem is solved to the extent of one-third and the ethanol branding program is a very ambitious program launched by the country, he added.

The government move will assist the industry, which has invested billions of dollars over the last five years to boost ethanol production capacity, said a senior industry official, also preferring anonymity.

Anticipated production decreases have driven local sugar prices to their highest levels in nearly 14 years.

India’s fuel retailers buy ethanol from sugar mills to blend with gasoline and they were paying higher prices for ethanol produced from juice and B-heavy molasses, the report said.

Earlier Reuters had reported that a committee of ministers decided to focus on sugar production this year after assessing the demand-supply situation. The government would allow mills to produce ethanol only from C-heavy molasses, a cane by-product that has hardly any sugar content left in it, the report said, citing a government official.

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