Shree Renuka Sugars has welcomed the government’s decision to lift the cap on the amount of sugar that can be diverted for ethanol production for the supply year December to November 2024-25.
Executive Chairman Atul Chaturvedi noted that the impact of this change will be more apparent once the next crushing season begins, as cane juice is currently unavailable due to the absence of crushing operations, reported CNBCTV18.
On August 29, the government permitted the use of sugarcane juice and sugar syrup for ethanol production in the 2024-2025 ethanol supply year (ESY), reversing the restrictions imposed the previous year. This policy shift allows for ethanol production from cane juice, B-heavy molasses, and C-heavy molasses for ESY 2024-25, providing significant relief and optimism to the sugar industry.
The adjustment is viewed as a major positive development, especially since the distillery sector had been performing well before the ethanol policy changes in the third quarter of 2023-24 (Q3FY24). Ethanol production typically offers better profit margins compared to sugar sales, which is promising for companies such as Balrampur Chini Mills, Shree Renuka Sugars, and Dwarikesh Sugar Industries.
The policy change also benefits Praj Industries, a company that provides technology to the distillery sector.
Prashant Biyani, VP of Institutional Equity Research and Sector Lead for Agri-Inputs, Sugar, and Hotels at Elara Securities, said the government’s recent decision was anticipated, well-timed, and positively affected sentiment in the sugar sector. He expects the benefits to be realized between FY25 and FY26.
From a seasonal perspective, larger companies like Balrampur could see volume growth of 20% to 25%. For smaller players, growth will vary based on production capacity and feedstock type. “A good 20% volume growth is possible from season to season, starting the next season,” he added.
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