Government Reverses Ban on Sugarcane Juice for Ethanol, Sugar Stocks Surge 

The food ministry has issued a fresh order, overturning the ban on using sugarcane juice for ethanol production. This decision has led to a surge of up to 8% in sugar stocks during early trade on December 18. The ministry has permitted the use of sugarcane juice and B-heavy molasses for producing green fuel in the upcoming 2023–24 supply year.

The market response to this reversal has been swift. As of 9.30 AM, Balrampur Chini Mills and Shree Renuka Sugars have witnessed gains of around 7.5%, Dalmia Bharat Sugar stock increased 6.5%. Triveni Engineering and E I D-Parry (India) have also risen around 5% each. A total of 32 sugar sector stocks gained up to 11% signaling a positive turn for the industry. This positive shift comes after a recent downturn, where shares of Balrampur Chini Mills, Dalmia Bharat Sugar, Shree Renuka Sugars, and Triveni Engineering declined ranging from 7.6 to 17.5% between December 6 and December 16.

Background: Government's Earlier Move and Industry Concerns

The government's decision to restrict ethanol production from sugarcane was initially prompted by concerns over erratic monsoons affecting sugarcane crops, leading to extended export restrictions beyond October 31. The Indian Sugar Mills Association (ISMA) had anticipated an 8% decline in sugar production, projecting 33.7 million tonnes in 2023-24. 

On December 5, the food ministry directed sugar mills and distilleries to expect a revised allocation of sugarcane juice and B-heavy molasses-based ethanol for the 2023–24 supply year. The reversal of the ban on December 18 has brought relief to the sugar industry, reflected in the surge of sugar sector stocks by up to 11 percent in today's trading session.

Easing Concerns and Restored Confidence

The government's decision to reverse the ban on using sugarcane juice for ethanol production has not only provided a boost to sugar stocks but also alleviated concerns within the industry. With the allowance of both sugarcane juice and B-heavy molasses for green fuel production in the upcoming supply year, the outlook for sugar makers has improved. The move is seen as a measure to balance sugar prices and ensure an adequate supply in the domestic market. As the industry adapts to this positive development, stakeholders will be closely monitoring the ongoing dynamics in the sugar sector.