Sugar Stocks Surge over 10% as Government Clears Unrestricted Ethanol Production

Shares of sugar companies rallied sharply on Tuesday, September 2, after the government cleared the way for unrestricted ethanol production in the upcoming marketing year. The move has sparked investor enthusiasm, with major stocks in the sector posting significant gains.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

On the NSE, Dhampur Sugar Mills Share Price surged 12.78% to ₹141.79 apiece, while Shree Renuka Sugars jumped over 14% to ₹33.09. Balrampur Chini Mills rose more than 6% to ₹578.35, and Triveni Engineering climbed nearly 3.5% to ₹363.35.

Government’s Green Signal for Ethanol

The rally follows the food ministry’s notification on Monday that sugar mills and distilleries will be allowed to produce ethanol without any quantitative restrictions in the 2025-26 Ethanol Supply Year (ESY), beginning in November.

Under the new framework, mills can manufacture ethanol using sugarcane juice, sugar syrup, B-heavy molasses, and C-heavy molasses. The ministry also clarified that it will periodically review sugar diversion to ethanol production in consultation with the petroleum ministry to ensure sufficient domestic sugar availability.

In the current ESY 2024-25, the government has capped diversion at 40 lakh tonnes of sugar. The removal of limits from next year marks a significant policy shift aimed at supporting the ethanol blending programme.

India has been steadily advancing its ethanol strategy under the Ethanol Blended Petrol (EBP) programme. Public sector oil marketing companies (OMCs) blend ethanol with petrol, and as of July 31, 2025, the average blending rate had reached 19.05%. The National Policy on Biofuels 2018, amended in 2022, brought forward the target of 20% ethanol blending in petrol to ESY 2025-26 from the earlier 2030 deadline.

Industry and Market Outlook

The government’s stance is expected to stabilise sugar mills’ earnings by diversifying revenue streams beyond volatile sugar prices. Ethanol sales not only ensure better cash flows but also strengthen India’s energy security by reducing crude imports.

According to Mordor Intelligence, India’s cane sugar market is valued at $55.40 billion in 2025 and is projected to grow to $65.78 billion by 2030, with a compound annual growth rate (CAGR) of 4.05%. The report highlighted that consistent ethanol mandates, strong domestic cane supply, and growing demand from food processors will underpin this growth.

The study also noted that mills are adopting precision farming and micro-irrigation to enhance yields while conserving water resources, thereby securing raw material supplies for the long term.

Conclusion

With ethanol production now open-ended, the sector is expected to witness fresh investments, steady profitability, and a stronger alignment with India’s renewable energy goals.