Sugar stocks were in for a sweet surprise on Dalal Street on August 30, thanks to a new government policy allowing sugar mills to produce ethanol from cane juice or syrup for the upcoming Ethanol Supply Year (ESY) 2024-25. Nearly all sugar companies saw their shares rise, with Dalmia Bharat Sugar, Shree Renuka Sugar, Triveni Engineering, and Bajaj Hindusthan climbing up to 16 percent.
So far this year, Balrampur Chini, Bajaj Hindusthan, EID Parry, Rajshree Sugars, Triveni Engineering shares jumped up to 46 percent, as compared to benchmark Nifty 50's 15 percent rise.
This policy update lifts the previous cap on using sugar for ethanol production. Now, in addition to cane juice and syrup, mills can also use B-Heavy and C-Heavy molasses to produce ethanol. This change is part of the government's strategy to boost renewable energy use and reduce reliance on fossil fuels.
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The government has also allowed distilleries to buy up to 2.3 million metric tons of rice from the Food Corporation of India specifically for ethanol production, aiming to increase ethanol output and support the broader fuel blending initiative.
To ensure this shift doesn't impact domestic sugar availability, the Department of Food and Public Distribution and the Ministry of Petroleum and Natural Gas will work together to monitor and review the diversion of sugar to ethanol production.
This policy change is part of the government's broader effort to enhance ethanol production and promote sustainable energy practices. By allowing a wider range of sugar derivatives for ethanol production, the government aims to improve the efficiency and flexibility of the ethanol supply chain while maintaining stable domestic sugar supplies.
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