Sugar stocks gain as Cabinet hikes ethanol price by 25%

Shares of sugar companies have moved higher by up to 20% on the BSE after the Cabinet approved a hike in ethanol price by 25%, which is likely to help sugar mills to divert their production from sugar.

Simbhaoli Sugars, Shree Renuka Sugars, Dhampur Sugar Mills, Dwarikesh Sugar Industries, Avadh Sugar & Energy, Ugar Sugar Works, and Magadh Sugar & Energy were up in the range of 5% to 20% on the BSE. In comparison, the S&P BSE Sensex was up 0.87% at 37,739 points at 03:22 PM.

“The union cabinet on Wednesday increased the procurement price of ethanol produced from B-heavy molasses (also called as intermediary molasses) to Rs 59 a litre from the current Rs 47.13 a litre and that produced from C-heavy molasses to Rs 53 a litre from the existing Rs 43.46 a litre, an increase of 25%. Such an increase might lead to more sugar production as more mills start producing ethanol,” the Business Standard reported.

Going forward, as and when newer and fresh capacities get added on to the sugar mills in next 3-4 years, India's sugar industry would be able to meet the entire demand of OMCs for 10% blending which is 3.3-3.4 million litres of ethanol. Of this, 1 billion litres of new capacities and around 350 million litres of distillation capacity is expected to be added by end of 2018-19 sugar season, added report. CLICK HERE TO READ FULL REPORT