Sugar stocks were surging on Friday after the government removed the cap on sugar diversion for ethanol production for the upcoming ethanol supply year 2024-25, which spans from December to November.

What Happened: This decision, aimed at boosting ethanol output, will allow sugar mills and distilleries to produce ethanol from sugarcane juice, sugar syrup, B-heavy molasses and C-heavy molasses, based on agreements with oil marketing companies (OMCs).

The move signals a significant push toward increasing ethanol supply, as the Department of Food and Public Distribution will collaborate with the Ministry of Petroleum and Natural Gas to regularly review sugar diversion for ethanol production. This is to ensure that the country’s sugar availability for domestic consumption remains stable throughout the year.

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More Good News: In a related development, the government has also allowed ethanol distilleries to participate in the Food Corporation of India’s rice auctions. Between August and October, distilleries will be able to lift rice, with the condition that the rice is allocated for ethanol production by the OMCs. A maximum of 23 lakh metric tonnes of rice will be made available for this purpose.

This policy shift comes at a critical time, as India faces the possibility of missing its ethanol-petrol blending target of 15% for the current year. The previous cap on ethanol production from sugarcane molasses limited the supply to OMCs to 1.7 million tonnes for the ethnaol supply year.

By lifting the restrictions on sugar diversion, the government aims to ensure it meets its blending goals while supporting the country's energy transition efforts.

Price Action: In early trade on Friday, EID Parry (India) climbed 6.18% while Balrampur Chini Mills share price increased 7.38%.

Shree Renuka Sugars rose 8.06% and Triveni Engineering and Industries jumped 8.4%. Bajaj Hindusthan Sugar was up 8.49% while Bannari Amman Sugars surged 8.6%.

Dalmia Bharat Sugar & Industries clocked a 12.25% rise. DCM Shriram Industries was gaining 5.29%. Avadh Sugar & Energy’s share price appreciated 8.09%. Dhampur Sugar Mills shares went up 8.8% in the session.

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