India sugar stocks fall after government halts ethanol diversion for 2026/27
Indian sugar companies come under pressure in early Monday trading as New Delhi moves to channel more cane output toward domestic sugar supply. The restriction removes key feedstocks from the latest ethanol tender for the 2026/27 supply year, raising concerns over margins and returns on capacity built for biofuel production.
Highlights
- India's government ordered oil marketing companies to halt sugar diversion to ethanol production for 2026/27, constraining producers' feedstock flexibility.
- Shares of Balrampur Chini Mills, EID Parry, Triveni Engineering, Bajaj Hindusthan Sugar, Shree Renuka, and Dhampur Sugar fell 2%-6% in morning trade following the ethanol restriction.
- The ethanol policy aims to boost domestic sugar supply and counter a more than 10% rise in sugar prices amid inflation and output concerns from weak rainfall.
Policy shift curbs ethanol feedstock flexibility
As reported by Reuters, the government has directed oil marketing companies to reduce sugar diversion for ethanol production to zero for the 2026/27 supply year, a step that tightens the operating choices available to sugar producers.The latest ethanol tender excludes supplies produced from sugarcane juice, sugar syrup and B-heavy molasses, a sugar-rich by-product of cane crushing. That limits companies' ability to move cane and molasses between sugar and ethanol depending on market conditions, potentially weakening margins and lowering returns on ethanol-capacity investments.
Balrampur Chini Mills, EID Parry, Triveni Engineering and Industries, Bajaj Hindusthan Sugar, Shree Renuka and Dhampur Sugar fall between 2% and 6% in morning trade.
Food inflation concerns drive domestic supply focus
The move is aimed at increasing domestic sugar availability and easing record high prices in India, the world's biggest sugar consumer. Sugar prices have risen more than 10% amid the festive season, increasing concern over near-term food price pressures before the main crushing season begins.Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services, says the price rise is adding to those concerns. Analysts from Motilal Oswal and Choice Broking add that the decision reflects the government's priority of protecting food supplies after worries that weak rainfall in key producing states could curb output.
Our earlier report on India’s widening merchandise trade deficit in September noted that imports continued to outpace exports, pushing the gap to $30.21 billion. We highlighted that elevated crude prices were a key driver of the higher import bill, keeping pressure on the external balance even as India moved to diversify export markets through new trade agreements.
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