Shares of sugar companies gained sharply on Thursday after the government increased the target date for achieving 20 percent ethanol-blending in petrol to 2023.

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Last year, the government had set a target of reaching 10 percent ethanol-blending in petrol (10 percent of ethanol mixed with 90 percent of diesel) by 2022, and 20 percent doping by 2030. Earlier this year, the target for 20 percent blending was brought forward to 2025. And now, it has been further advanced to April 2023.

Among stocks, Balrampur Chini Mills rallied around eight percent while Triveni Engineering & Industries, Dhampur Sugar Mills, Dwarikesh Sugar Industries, Avadh Sugar and EID Parry (India) rose between 2 and 4 percent.

The sugar industry will divert six million tonnes of surplus sugar to produce seven billion litres of the ethanol needed, while the remaining ethanol will be produced from excess grain.

In the current ethanol supply year, which started in October 2020, India plans to have 10 percent ethanol-blending with gasoline. As much as four billion litres of ethanol will be needed for achieving a 10 percent mixing ratio.

Sugar stocks have also been on an uptrend as Brazil face the worst sugar production in 91 years. Brazil is the largest producer and exporter of sugar. About 21 percent of the world’s sugar is produced in Brazil and 45 percent of total exports also coming from the country. Due to the dry spell, Indian exports have been strong. India exported 5.7 million tonnes at the subsidy of Rs 6 per kg.

“On the domestic front, favorable policies, rising ethanol demand, aggressive ethanol capacity addition would drive an earnings CAGR of 15-20 percent over FY21-24E for our coverage companies. Sugar oversupply is a thing of the past as higher diversion of sugar in favor of ethanol (around 2.0mn tonne sugar in SS21 and >5-6mn tonne by SS24) would keep net sugar production under around 30mn tonne,” analysts at Elara Capital said in recent sugar sector report.

—With inputs from PTI

(Edited by : Ajay Vaishnav)