Stock prices of major sugar companies fell on Monday after the government’s decision to discontinue the use of sugarcane juice, or sugar syrup, for ethanol production during the supply year 2023-24 (November-October).
Stock prices of Balrampur Chini and Dhampur Sugar declined by 3% and 2.3% to Rs 397 and Rs 246, respectively, compared with prices prevailed on December 7, when the government had made the announcement.
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Share prices of Triveni Engineering and Shree Renuka Sugar witnessed a marginal decline compared with December 7 prices to Rs 47.35 and Rs 346.2.
A senior official with a sugar company told FE that the real impact of disruption in supply of sugar syrup for ethanol production is yet to be assessed.
“The restriction will result in lower diversion towards ethanol, which may lead to the ethanol blending ratio falling below 10% for ESY2024. The same was around 12% for ESY2023,” Sabyasachi Majumdar, senior vice president and group head, ICRA, said. However, the tight demand-supply situation is expected to keep sugar prices firm and profit margins at a satisfactory level.
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The India Sugar Mills Association said because of this pause in supply, the crushing capacity of sugar mills will come down, leading to delay of the crushing season. This will result in more losses for farmers as their payments will get stretched. Sugar mills, too, will face losses.
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