Sugar stocks rally as govt allows production of RS, ENA from sugarcane juice, B-Heavy molasses

India is the world’s second-largest sugar-producing country after Brazil. The government aims to achieve the 20 percent ethanol blending target by 2025-2026.

Sugar stocks rallied up to 7 percent on September 16 after the Department of Food and Public Distribution (DFPD) authorised sugar mills and distilleries to manufacture Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) using sugarcane juice and B-heavy molasses.

The move came alongside the government's recent approval for sugar mills and distilleries to produce ethanol from sugarcane juice, B-Heavy molasses, and C-Heavy molasses for the Ethanol Supply Year (ESY) 2024-25.

Shares of Dhampur Sugar Mills, Bajaj Hindustan Sugar, Balrampur Chini Mills, Dalmia Bharat, Awadh Sugar, Mawana Sugars, Shree Renuka Sugar, Triveni Engineering rose up to 7 percent.

DCM Shriram Industries, Bannari Amman Sugars, Davangere Sugar Company, EID Parry stocks were also trading with gains of around 1-2 percent.

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With adequate sugar stocks in India, analysts expect a resumption of the ethanol-blending program as was the case until Sugar Season (SS) 23.

In December 2023, the government prohibited the use of sugarcane juice or sugar syrup for ethanol production in the 2023-2024 ESY (December-November) to ensure adequate sugar availability for domestic consumption and keep prices in check.

Official data shows ethanol blending in India has reached 13.3% by July of the current season, up from 12.6% during the 2022-2023 season. Currently, the country’s total ethanol production capacity stands at 1,589 crore litres. Of this, OMCs purchased 505 crore litres of ethanol for blending purposes during the 2023-2024 season.

It is worth noting that India is the world’s second-largest sugar-producing country after Brazil. The government aims to achieve the 20 percent ethanol blending target by 2025-2026.

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