New Delhi/Alive News: Indian sugar stocks fell in early trading on Monday after the government directed oil marketing companies to stop diverting sugar for ethanol production during the 2026-27 supply year.
The latest ethanol tender excludes ethanol supplies made from sugarcane juice, sugar syrup and B-heavy molasses, a by-product of sugar production. The decision limits sugar companies’ flexibility to shift raw materials between sugar and ethanol production based on market conditions.
The move could put pressure on companies’ profit margins and reduce returns on investments made in ethanol production capacity. However, the government’s decision is aimed at increasing domestic sugar supplies and controlling rising prices.
Sugar prices in India, the world’s largest sugar consumer, have increased by more than 10% during the festive season. This has raised concerns about food price inflation ahead of the main sugarcane crushing season, according to Siddhartha Khemka, head of research at Motilal Oswal Financial Services.
Analysts at Motilal Oswal and Choice Broking said the decision reflects the government’s focus on maintaining domestic food supplies. Concerns over lower rainfall in key sugar-producing states have also raised questions about the country’s sugar output.
The restriction could affect sugar companies that have invested in ethanol production, while potentially improving domestic sugar availability. The overall impact will depend on sugar production, market prices and the companies’ ability to adjust their operations.
