From Shree Renuka Sugars to Balrampur Chini, sugar stocks rally after India removes ethanol production curbs

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India’s sugar stocks surged on the stock market today, after the government removed all limits on ethanol production from sugarcane.

In the new ethanol supply year starting from 1 November 2025, sugar mills are allowed to produce ethanol without any quantitative restriction.(HT)

Shree Renuka Sugars, Avadh Sugar & Energy, Bajaj Hindusthan Sugar, Balrampur Chini Mills, Dalmia Bharat Sugar, Dhampur Sugar Mills, KM Sugar Mills Ltd., and Dwarikesh Sugar Industries Ltd. rose as much as 15% intraday.

In the new ethanol supply year starting from 1 November 2025, sugar mills and distilleries are allowed to produce ethanol without any quantitative restriction, the Union Ministry of Consumer Affairs, Food & Public Distribution said in a notification on Monday. The Centre will periodically review sugar diversion to ethanol to ensure year-round domestic availability of the sweetener.

The world's second-biggest sugar producer had restricted production in the current marketing year because of a drop in sugarcane supplies. India, the third-largest oil importer globally, aims to increase the blending of ethanol into petrol to 20% by 2025-26.

In the new season, sugarcane supplies are expected to jump as ample monsoon rains for two straight years have helped farmers to expand the area under the crop.

“This is a welcome move. The government should also raise the ethanol procurement price so that mills can pay farmers the government-fixed cane price,” Reuters quoted a sugar miller in Maharashtra as saying.

Analysts’ Take

This decision empowers sugar firms to maximise ethanol production capacity, capitalizing on favourable crop conditions, according to Seema Srivastava, senior research analyst at SMC Global Securities.

“The removal of caps is expected to enhance profitability for sugar mills, as they can now divert more cane juice or molasses towards ethanol production which offers better realisations. With this development, sugar stocks are likely to see a sustained rally, buoyed by improved margins and a positive long-term outlook for the sector.”

Ruchit Jain, vice president of equity research at Motilal Oswal Financial Services Ltd., believes the rally in sugar stocks is led by high volumes. Since the stocks have consolidated in a range in the recent past, the positive news flows along with the positive broader markets momentum could lead to short term gains.

According to Osho Krishan, senior analyst (technical and derivatives) at Angel One, India’s sugar sector was stagnating until the ethanol high. The rally in sugar stocks seen is likely to sustain in the near-term. “However, one must adopt a firm risk management while trading in the sector and focus on stock-specific moves,” he said.

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