Sugar stocks rally up to 20% as India advances ethanol-blending in petrol to 2025

Shares of sugar companies rallied up to 20% on Monday after Prime Minister Narendra Modi on Saturday said the target date for achieving 20% ethanol-blending with petrol has been advanced by five years to 2025 to cut pollution and reduce import dependence.

KM Sugar Mills climbed the most 20% to Rs 23.40. Dalmia Bharat Sugar and Industries, Avadh Sugar & Energy, Uttam Sugar Mills, Triveni Engineering and Magadh Sugar & Energy also rallied over 10%. Other sugar majors also gained over 3% after the announcement.

Ethanol extracted from sugarcane as well as damaged food grains such as wheat and broken rice and agriculture waste is less polluting and its use also provides farmers with an alternate source of income.

Speaking at the launch of the ethanol road map on the occasion of World Environment Day, Modi said the target for mixing 20% ethanol in petrol has been brought forward from 2030 to 2025.

Last year, the government had set a target of reaching 10% ethanol blending in petrol (10% of ethanol mixed with 90% of diesel) by 2022 and 20 per cent doping by 2030.

Currently, about 8.5% ethanol is mixed with petrol as against 1-1.5% in 2014, he said adding ethanol procurement has risen from 38 crore litres to 320 crore litres.

Last year, oil companies spent Rs 21,000 crore on ethanol procurement, he said.

S Ranganathan, Head of Research, LKP Securities said, “We have been extremely bullish on UP based sugar companies for the last one year based on the premise that the ethanol story will pan out well and capacity additions at distilleries in anticipation were being built up. Today with the blending targets preponed all the fully integrated sugar companies based in UP – namely Balrampur, Triveni, Dhampur, Dalmia, DCM and Dwarikesh have seen their stock prices rise manifold.”