Sugar Stocks Rally Up To 20% After Govt Lifts Curbs On Ethanol Production

Sugar stocks rallied up to 20 per cent on September 2, 2025 after the government allowed sugar mills and distilleries to produce ethanol from sugarcane juice or syrup, B-heavy and C-heavy molasses without any restrictions.

"Sugar mills and distilleries are allowed to produce ethanol from sugarcane juice/sugar syrup, B-Heavy Molasses as well as C-Heavy Molasses during ESY 2025-26 without any restriction," said Ministry of Consumer Affairs in a notice dated September 1, 2025.

ESY or Ethanol Supply Year begins in November and ends in October.

The Department of Food and public Distribution will work with the Ministry of Petroleum and Natural Gas to keep reviewing how much sugar is being diverted to ethanol, so that there is enough sugar available for domestic consumption throughout the year, added Ministry of Consumer Affairs in its notice.

This order comes as part of government’s push towards its target of achieving 20 per cent ethanol blending with petrol by ESY 2025-26, a goal that was advanced from the earlier deadline of 2030.

Sugar Stocks Rally Up To 20%

Shares of Rajshree Sugars and Chemicals and Kothari Sugars and Chemicals skyrocketed 20 per cent each, hitting their upper circuits amid strong buying activity. Following it, Shree Renuka Sugars surged up to 15 per cent, Dwarikesh Sugar Industries jumped as muchas 14 per cent, and Dhampur Sugar Mills advanced more than 13 per cent.

Similarly, other sugar producers such as Bajaj Hindustan Sugar,  The Ugar Sugar Works, and Shakti Sugars gained in double digits.

Major players Balrampur Chini Mills surged more than 7.2 per cent and Triveni Engineering & Industries rose over 4.3 per cent.

How Ethanol Production Policy In India Evolved

The order also comes at a time when sugar production has been fluctuating in recent years because of erratic monsoon. These issues had earlier led the government to curb the use of sugarcane for ethanol. With the recent policy, mills are now expected to increase supplies to Oil Marketing Companies (OMCs), which should help meet the ethanol blending target while keeping enough sugar for local consumption.

Back in December 2023, the government restricted mills from using sugarcane juice and syrup to make ethanol for ESY 2023–24. Mills were allowed to only use C-heavy molasses, while B-heavy molasses was allowed under old contracts. The decision was undertaken to ensure availability of sugar for domestic consumption amid weak cane supplies.

Later that month, the rules were partially relaxed. Mills were allowed to use some sugarcane juice and B-heavy molasses for ethanol, but only as per revised allocations given by oil marketing companies (OMCs). At the same time, the government made it clear these raw materials could not be diverted to make rectified spirit or extra neutral alcohol.

On August 29, 2024, the government lifted the curbs on sugar diversion for ESY 2024–25. Mills and distilleries were allowed to make ethanol freely from cane juice, syrup, B-heavy and C-heavy molasses in line with OMC allocations. Distilleries were also allowed to bid for rice from the Food Corporation of India (FCI), up to 2.3 million tonnes, for ethanol production.

However, now, the government has removed all quantitative restrictions on ethanol production for ESY 2025-26. That means, starting November 1, mills and distilleries can produce ethanol from sugarcane juice, syrup, and all grades of molasses without much curbs.