Sugar stocks revive as government incentivises production of ethanol

Government increased the price of ethanol by 25 per cent in order to incentivise sugar mills to utilise sugar cane juice for the production of ethanol. This will help reduce the formation of an expected sugar surplus this year.

The Central Cabinet on Wednesday approved a 25 per cent increase for the price of ethanol derived from 100 per cent sugar cane juice. The price was hiked from Rs 47.13 per litre of ethanol to Rs. 59.13 per litre. The sugar mills participating in this scheme will have to utilize 100 per cent of the cane juice produced in their facility for the production of ethanol instead of producing sugar. Ethanol produced from C-Molasses is priced at Rs. 43.70 per litre.

In India, 45 per cent of the Ethanol produced is used for making potable liquor, another 40 per cent is used as solvents for the synthesis of organic chemicals and the remaining is used for blending with petrol and other purposes. In high crude oil price environment, ethanol blending will help the government lower the fuel import bill. In 2017-18, the industry supplied around 1.64 billion litres of ethanol to Oil marketing companies for blending, which was against a requirement of 3.13 billion litres of ethanol.

With this price hike government also aims to increase the investments for the capacity building as experts believe that there is hardly any sugar mill in India that buys sugar cane only for the production of ethanol. This also means that there would be no immediate impact from this decision.

On the other hand, the major crisis faced by the sugar industry is that domestically as well as internationally sugar prices are falling. This is causing financial distress to the sugar cane farmers and they are demanding higher prices for their cane which the government provides through the Minimum support price. But the sugar mills avoiding paying farmers for their sugar cane while they are making losses. Government intervenes by providing incentivises to the mills who clear farmer arrears. But the fundamental problem of lower sugar prices continues to hurt the industry.


Meanwhile, major sugar stocks including Balrampur Chini, Ravalgaon Sugar, Triveni, Dharani, Shree Renuka Sugar closed higher on Wednesday. The stock of Balrampur Chini closed at Rs. 77.85 per share, up 2.10; Ravalgaon Sugar closed at Rs 3,752.10, up by 2.00 per cent, while EID Parry closed at Rs. 214.05, up by 1.66 per cent on BSE.