Sugar companies' shares rose in trade on Wednesday afternoon after the government approved increasing ethanol prices by up to 25 percent.

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Dwarikesh Sugar rose 5.6 percent, Shree Renuka rose 3.48 percent, Dhampur Sugar rose 4.6 percent, Sakhti Sugars gained 2.84 percent and Avadh Sugar was up by 2.41 percent.

Dwarikesh Sugar surged 5.6 percent to trade at Rs 20.55, above its 100 day moving average. Dhampur Sugar traded at Rs 92.50, more than its 100 day moving average of 89.28.

A senior Indian Sugar Mills Association representative, while speaking to CNBC-TV18, welcomed the move and said that it will attract many companies to divert sugar business to ethanol.

Shree Renuka Sugars said, "the move to increase prices of ethanol by 25 percent is a welcome one. Given the way crude prices are moving, going the ethanol route makes sense. Around 0.7-1 MT of sugar may get used out of the excessive production."