Sugar stocks were in the spotlight on September 2. Shree Renuka Sugars Ltd. surged over 15%, reaching an intraday high of ₹33.50 and Balrampur Chini Mills Ltd. surged to an intraday high of ₹584.00, among others.

The sharp move came after the government removed all restrictions on ethanol production from sugarcane juice, syrup, and both B-heavy and C-heavy molasses for the 2025–26 supply year.

What Changed?

Until now, sugar mills faced limits on how much sugarcane could be diverted for ethanol production. These caps were introduced in earlier years to ensure enough sugar availability for domestic consumption when cane supplies were tight. The latest notification gives mills full freedom to produce ethanol from any form of cane or molasses without quantity restrictions.

The Department of Food and Public Distribution, along with the Ministry of Petroleum and Natural Gas, will still monitor the diversion of sugar to ethanol to safeguard domestic supply. But the immediate signal is clear: ethanol output will no longer be artificially capped, giving mills greater operational flexibility.

Why Does This Matter?

For sugar companies, ethanol is a far more profitable product than refined sugar. Using B-heavy molasses or cane juice for ethanol typically results in higher realizations, improves cash flow, and helps reduce inventory pressures. With India targeting 20% ethanol blending in petrol by 2025–26, demand for the fuel additive remains strong, creating a reliable revenue stream for mills.

The ethanol policy is part of India’s broader energy strategy. Reducing crude oil imports and promoting cleaner fuel alternatives has made ethanol blending a national priority. For sugar companies, this translates into long-term demand security. Following the announcement, stocks of leading sugar producers surged sharply in trade, with gains of up to 20% across the sector.

Note: The stock prices mentioned are as of 3:30 pm.

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