Sugar stocks slip after govt's latest ethanol procurement tender
NEW DELHI: Sugar stocks turned sour on Monday, tumbling over 5% after the government halted sugar-based ethanol supplies for 2026-27.Bajaj Hindusthan Sugar led the losses among the listed companies, with its shares falling 5.22% to Rs 20.16 on the Bombay Stock Exchange in early trade.
Dwarikesh Sugar Industries declined 4.45% to Rs 44.28, while Shree Renuka Sugars dropped 4.43% to Rs 21.16.
Dalmia Bharat Sugar and Industries slipped 3.24% to Rs 466, Dhampur Sugar Mills fell 2.81% to Rs 191.90 and Balrampur Chini Mills lost 2.55% to Rs 704.35. EID Parry India was down 1.57% at Rs 683.75 on the BSE.The sell-off came after the latest ethanol procurement tender barred supplies made from sugarcane juice, sugar syrup and B-heavy molasses.
For sugar mills, the decision shuts the door on an important outlet for their produce, particularly one that offers higher margins.Dalal Street also started the week on a weak note, with the BSE Sensex slipping 307.63 points, or 0.41%, to 74,421.64, while the Nifty 50 fell 81.30 points, or 0.35%, to 23,096.80.
Oil firms drop sugar-based ethanol from 2026-27 tender
The government has directed oil marketing companies (OMCs) to bring sugar diversion for ethanol production down to zero during the 2026-27 supply year.
The restriction was set out in a tender issued by Bharat Petroleum Corporation Ltd (BPCL) on October 16 on behalf of state-run OMCs. "The Government of India has issued directions that sugar diversion for ethanol be reduced to zero for ethanol supply year 2026-27," the tender document said, as cited by PTI.It further stated, "No offers have been sought for ethanol produced from sugarcane juice, sugar or sugar syrup and B-heavy molasses in this quantity bid tender."The tender seeks bids for around 11 billion litres of ethanol for the period from November 2026 to October 2027. The volume is intended to meet the requirement of blending 20% ethanol with petrol under the nationwide programme.
Grain-based ethanol takes centre stage
With sugar-based feedstocks excluded, the tender allows producers to offer ethanol made from maize, broken rice, surplus rice procured by the Food Corporation of India (FCI) and C-heavy molasses.However, the shift does not come with a higher incentive for maize-based ethanol. The procurement price has been reduced to Rs 68.86 per litre from Rs 71.86, while the incentive has been cut to Rs 2.79 per litre from Rs 5.79. The lower rates are expected to reduce returns for producers supplying ethanol made from maize.The changes reshape the feedstock options available to distilleries participating in the petrol-blending programme, which has so far drawn on both grain-based and sugarcane-based ethanol.
Sugar supply concerns behind the move
The decision comes at a time when domestic sugar availability is under pressure from concerns over production. Poor rainfall in key sugar-producing states, including Maharashtra and Karnataka, has raised the risk of lower output, alongside concerns about rising prices.India, the world's largest sugar consumer, has expanded ethanol blending to reduce its reliance on imported crude oil. But the use of sugarcane and sugar for fuel also competes with the quantity available for domestic consumption, particularly when production is constrained.The latest tender seeks to balance these competing requirements: maintaining adequate sugar supplies and containing domestic prices while continuing the country's petrol-blending programme.India has adopted petrol containing up to 20% ethanol, known as E20, as the nationwide standard. Ethanol is produced from agricultural raw materials, including sugarcane and grains, and blended with petrol to replace part of fossil fuel consumption.The programme has opened up a substantial market for domestic distilleries and provided farmers with an additional source of demand for agricultural produce.For the 2026-27 supply cycle, however, the exclusion of sugar-based ethanol puts greater emphasis on alternative feedstocks. The availability of grain, procurement prices and distillery capacity will be important factors in meeting the programme's blending requirements.