The Indian government’s recent decision to permit ethanol production directly from sugarcane juice, syrup, and B-heavy molasses marks a turning point for both agriculture and energy. Starting from the 2025–26 ethanol supply year, this move aligns with the 20% ethanol blending (E20) target, sparking renewed optimism in the market. The immediate reaction was visible on Dalal Street, where sugar stocks surged by up to 20% in a single trading session.
Why Demand for Cane Will Jump
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Broader Feedstock Options: Ethanol can now be made not just from surplus sugar or molasses but directly from cane juice, giving mills flexibility to switch between sugar and ethanol depending on demand.
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Farmer Advantage: With mills expected to crush more cane for longer durations, farmers are likely to benefit from timely payments and reduced arrears.
Global Trade Balance: As more cane is diverted to ethanol, India’s sugar exports could shrink, potentially tightening global supplies and firming up international prices.
Benefits for Consumers and the Economy
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Lower Fuel Bills: Ethanol-blended petrol is generally cheaper than pure petrol, which can help households save on transportation costs.
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Energy Independence: Cutting down crude oil imports reduces exposure to global price shocks, easing inflationary pressure.
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Price Stability in Sugar: Diverting excess cane towards ethanol prevents both surplus-driven price crashes and shortage-driven spikes, leading to more predictable household sugar costs.
Support for Rural Economies: Higher farmer incomes translate into stronger rural spending power, boosting local consumption.
Price Outlook
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Sugar Prices
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Domestic: Diverting cane to ethanol may tighten supply, nudging sugar prices higher. However, government intervention via buffer stock or trade adjustments will likely prevent sharp increases at the retail level.
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International: Lower Indian exports could raise global sugar prices, benefiting competing exporters such as Brazil and Thailand.
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Fuel Prices
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Ethanol is comparatively cheaper to produce than refining crude oil. Greater blending will act as a cushion against petrol price inflation, keeping it more pocket-friendly for consumers.
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Over time, reduced subsidy requirements may give the government additional fiscal space for other social schemes.
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Corporate Performance
- Sugar producers stand to gain from a dual revenue model—sugar and ethanol. Analysts anticipate a multi-year re-rating of ethanol-linked companies as demand strengthens.
Key Beneficiaries of the Policy:
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Balrampur Chini Mills
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Shree Renuka Sugars
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Bajaj Hindustan Sugar Ltd
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Dwarikesh Sugar
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Triveni Engineering & Industries
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Dalmia Bharat Sugar
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Uttam Sugar Mills
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Dhampur Sugar Mills
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Godavari Biorefineries
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Praj Industries
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Others
Long-Term Outlook:
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By 2034, ethanol could consume 20–22% of India’s total sugar output, a significant jump from around 9% today.
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India is on track to be among the world’s largest biofuel adopters, meeting climate goals while reducing oil dependency.
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Continuous policy support could transform the sugar industry from being cyclical and vulnerable to surplus pressures into a more resilient, demand-driven sector.
In short: This ethanol policy shift will raise cane demand, provide stability to farmers, make petrol more affordable, and help India advance towards its energy transition goals. At the same time, it sets the stage for a structural re-rating of sugar and ethanol companies.
What’s your take on this:
Is this just a short-term rally, or a structural shift?
Will sugar prices be affected?
What is the long-term vision behind this move?
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