Sugar company stocks have rallied up to 20 per cent on hopes of the government enhancing export quota after assessing the domestic production numbers in January and advancement in availability of ethanol-blended petrol at retail outlets.

Companies such as Dalmia Bharat Sugar and Industries rallied 14 per cent to ₹420, while Rajshree Sugar & Chemicals and Sakthi Sugars were up 20 per cent and 15 per cent to ₹67 and ₹33 on the BSE on Monday.

The government plans to launch 20 per cent ethanol-blended fuel and it will be available at select outlets from next month.

“We have achieved 10 per cent blending of petrol in June, which was well ahead of the November deadline. We have also accelerated efforts to reach the ambitious goal of 20-per cent ethanol blending by 2025-26. In fact, it will be available at selected outlets from next month,” Hardeep Singh Puri, Petroleum Minister, had said at the curtain raiser of the India Energy Week 2023 event last Friday.

K Dileep, Head - PMS, Geojit Financial Services, said sugar stocks reacted to the government plans to advance 20-per cent blending ethanol with petrol from December 2022/January 2023 against earlier plan to start from April 2023.

Sugar exports

In November, the government allowed the export of 60 lakh tonne of sugar for the 2022-23 marketing year (October-September). India exported a record 111 lakh tonne of sugar in the 2021-22 marketing year and earned about ₹40,000-crore foreign exchange besides becoming the world’s second largest exporter of sugar.

India produces about 320-360 lakh tonne of sugar a year against the domestic consumption of 260 lakh tonne. This results in huge carry-over stock of sugar with mills. The huge inventory leads to blockage of funds and delays payment of cane dues to farmers.

As per Indian Sugar Mills Association’s estimates, the total production is expected to be the highest ever at 410 lakh tonne (before diversion for ethanol) in the 2022-23 marketing year.

Sugar production has increased 5 per cent to 82 lakh tonne between October and December 15, while mills have contracted to export 45-50 lakh tonnes of sweetener.

Manish Chowdhury, Head of Research, Stoxbox, said sugar stocks have rallied amid hopes that the government may allow additional sugar exports which would help absorb the additional supply expected.

“We believe that there is a structural shift in the sugar sector towards ethanol and any additional supply would be diverted towards it,” he added.