Sugar stocks rise up to 8% on hopes of MSP hike, ethanol price boost; Shree Renuka, Balrampur Chini top gainers

Sugar stocks experienced a significant uptick in intraday trading on Friday, September 27, following remarks by Indian Food Minister Pralhad Joshi. On Thursday, Joshi indicated that the government is considering increasing ethanol prices for the 2024-25 season, along with a review of the minimum selling price of sugar and sugar exports for the same period.

The minister mentioned that a committee of secretaries is currently discussing a proposal to raise the minimum selling price of sugar. 

"We were optimistic about sugar production for the 2024-25 season starting October," Joshi told reporters on the sidelines of the India Sugar and Bio-Energy Conference, organised by the Indian Sugar and Bio-Energy Manufacturers Association (ISMA).

Following this development, several sugar stocks experienced significant gains during the session, with Shree Renuka Sugars leading the rally with an 8 per cent increase, followed closely by Balrampur Chini Mills and Bajaj Hindusthan Sugar, both rising 6%. Mawana Sugars saw a 5.6% uptick, while KM Sugar Mills gained 5%.

Additionally, other sugar stocks such as Avadh Sugar & Energy, Dalmia Bharat Sugar and Industries, Magadh Sugar & Energy, Rajshree Sugars & Chemicals, Dwarikesh Sugar Industries, Simbhaoli Sugars, KCP Sugar & Industries, Dhampur Sugar Mills, Sakthi Sugars, and Ugar Sugar Works all reported gains ranging from 4% to 5%.

Sugar price hike: A long overdue revision

The sugar industry is pushing for an increase in the minimum selling price (MSP) of sugar, which has remained at ₹31 per kg since February 2019, along with a rise in ethanol prices. Notably, the government has not updated ethanol prices since the 2022-23 supply year (November-October).

At present, ethanol produced from cane juice is priced at ₹65.61 per litre, while ethanol derived from B-Heavy and C-Heavy molasses is priced at ₹60.73 and ₹56.28 per litre, respectively. Reports indicate that the government views the ethanol blending program as crucial for meeting its green energy goals and enhancing the financial health of sugar mills.

On September 16, the Department of Food and Public Distribution (DFPD) permitted 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 lifted previous restrictions on the use of sugarcane juice, sugar syrup, and B-molasses for ethanol production in the 2024–25 ethanol supply year (ESY). This decision overturns last year’s ban and is expected to boost ethanol sales by channeling more sugar towards ethanol production, offering relief to sugar companies facing high inventory levels in FY24.

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