Sugar stocks jumped significantly in intraday trading on Friday, September 27, following remarks by Indian Food Minister Pralhad Joshi. On Thursday, Joshi indicated that the government was considering raising ethanol prices for the 2024-25 season, as well as reviewing the minimum selling price of sugar and sugar exports for the same period.
The minister said a committee of secretaries is currently discussing the proposal to increase the minimum selling price of sugar.
“We are optimistic about sugar production for the 2024-25 season starting in October,” Joshi told reporters on the sidelines of the India Sugar and Bio-Energy Conference organised by the Indian Sugar and Bio-Energy Producers Association (ISMA).
Following the development, several sugar stocks witnessed significant gains during the session, with Shree Renuka Sugars leading the pack with a gain of 8 per cent, followed by Balrampur Chini Mills and Bajaj Hindustan Sugar, both up 6 per cent. Mawana Sugars was up 5.6 per cent, while KM Sugar Mills was up 5 per cent.
Additionally, other sugar stocks such as Avadh Sugar & Energy, Dalmia Bharat Sugar & Industries, Magadh Sugar & Energy, Rajshree Sugars & Chemicals, Dwarikesh Sugar Industries, Simbhavali Sugars, KCP Sugar & Industries, Dhampur Sugar Mills, Shakti Sugars and Ugar Sugar Works all gained 4% to 5%.
Sugar price hike: Long overdue revision
The sugar industry has been pressing for an increase in the minimum selling price (MSP) of sugar, which has remained at Rs 31 per kg since February 2019, as well as an increase in ethanol prices. It is worth noting that the government has not updated ethanol prices since the 2022-23 supply year (November-October).
Currently, the price of ethanol produced from sugarcane juice is ₹65.61 per litre, while that of ethanol obtained from B-heavy and C-heavy molasses is ₹60.73 and ₹56.28 per litre, respectively. The report suggests that the government sees the ethanol blending programme as crucial to meet its green energy targets and boost the financial health of sugar mills.
On September 16, the Department of Food and Public Distribution (DFPD) allowed sugar mills and distilleries to produce rectified spirit (RS) and extra neutral alcohol (ENA) from sugarcane juice and B-heavy molasses.
In late August, the government removed previous restrictions on the use of sugarcane juice, sugar syrup and B-molasses for ethanol production in the 2024-25 ethanol supply year (ESY). The decision overturns last year’s ban and is expected to boost ethanol sales by directing more sugar towards ethanol production, providing relief to sugar companies facing high inventory levels in FY24.
Sugar companies’ stocks inflation to 8% on expectations of hike in MSP and rise in ethanol prices; Shree Renuka and Balrampur Sugar gain the most
