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Why sugar stocks rose up to 20% in trade today

The top gainer among sugar stocks was Avadh Sugar and Energy which hit the upper circuit of 19.99% to 472.65 level on BSE today. On Wednesday, the stock closed 6.47 per cent higher at Rs 393.90 on the BSE.

twitter-logo BusinessToday.In        Last Updated: September 14, 2018  | 13:09 IST
Why sugar stocks rose up to 20% in trade today

Sugar stocks gained up to 20 per cent on Friday after the government approved an over 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol.

The top gainer among sugar stocks was Avadh Sugar and Energy which hit the upper circuit of 19.99% to 472.65 level on BSE today. On Wednesday, the stock closed 6.47 per cent higher at Rs 393.90 on the BSE.

The stock of sugar manufacturer Bajaj Hindusthan Sugar rose up to 18.71% to 8.50 level on the BSE.

Balrampur Chini Mills too rose 10.60% to 86.10 on the BSE. The stock of Dhampur Sugar Mills was trading 19.96% higher at 117.20 level.

The stock of Dhampur Sugar Mills jumped 19.99% per cent to Rs 117.20 and Magadh Sugar and Energy rose 20% to Rs 106.80. Similarly, Simbhaoli Sugars (19.94 per cent), Shree Renuka Sugars (14.45 per cent), Ugar Sugar (19.94%), Dwarikesh Sugar Industries (19.90%) saw northward movement on BSE.

The Cabinet Committee on Economic Affairs on Wednesday raised the procurement price of ethanol derived from 100 per cent sugarcane juice to Rs 59.13 per litre from the current rate of Rs 47.13. The move would help sugar mills quickly release arrears of cane farmers, which stands at over Rs 13,000 crore.

According to market experts, gain in the counter of sugar prices is mainly due to the government approval of hike in the prices of ethanol.

Such increase may result into more sugar production as more mills may start producing ethanol, they added.

The price for ethanol produced from B-heavy molasses (also called as intermediary molasses) was hiked to Rs 52.43 a litre from the current Rs 47.13 but that for ethanol produced from C-heavy molasses was reduced marginally to Rs 43.46 from Rs 43.70. Diverting sugarcane juice for directly making ethanol, which can be doped in petrol, is common across the major sugar producing nations. Brazil tops the list where all the ethanol produced is directly made from sugarcane juice.

The move would help sugar mills quickly release arrears of cane farmers, which stand at over Rs 13,000 crore. As much as 40 per cent of these dues are in Uttar Pradesh alone.

Ethanol so extracted would be doped in petrol to cut reliance on imports. The government is looking at scaling up the blending to 10 per cent in the next couple of years from 4-5 per cent now.

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