Indian sugar stocks tumbled on Monday after the government barred sugar-based ethanol supplies for the 2026-27 supply year. Bajaj Hindusthan Sugar, Shree Renuka Sugars and other major producers fell on the BSE as investors assessed potential earnings pressure. The restriction removes an important market for sugarcane-based products and aims to preserve domestic sugar supplies amid production concerns.
Bajaj Hindusthan Sugar dropped 5.22% to Rs. 20.16 in early trade, leading losses among major listed companies. Dwarikesh Sugar Industries declined 4.45%, while Shree Renuka Sugars slipped 4.43% to Rs. 21.16. Dalmia Bharat Sugar, Dhampur Sugar Mills, Balrampur Chini Mills and EID Parry also traded lower.
BPCL Tender Excludes Sugar-Based Feedstocks
The sell-off followed a Bharat Petroleum Corporation tender issued on October 16 on behalf of state-run oil marketing companies. The tender seeks around 11 billion liters of ethanol between November 2026 and October 2027. It supports India's nationwide target of blending 20% ethanol with petrol.
The document states, “sugar diversion for ethanol be reduced to zero for ethanol supply year 2026-27.” It also excludes ethanol produced from sugarcane juice, sugar, sugar syrup and B-heavy molasses. These feedstocks previously allowed sugar mills to earn revenue by directing some output toward fuel production.
Grain-Based Ethanol Gets Greater Focus
The tender permits ethanol made from maize, broken rice, surplus Food Corporation of India rice and C-heavy molasses. However, lower procurement rates could limit returns for maize-based ethanol producers. The price fell to Rs. 68.86 per liter from Rs. 71.86, while the incentive declined to Rs. 2.79 from Rs. 5.79.
Sugar Supply Concerns Drive Policy
The restriction aims to keep more sugar available for domestic consumption and contain price pressures. Concerns over rainfall and production in Maharashtra and Karnataka have added uncertainty around supplies. India remains the world's largest sugar consumer and uses ethanol blending to reduce dependence on imported crude oil.
For sugar companies, the immediate concern centers on lower ethanol opportunities and possible margin pressure. Investors will monitor sugar prices, alternative feedstock availability and any changes to government procurement rules.
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