Ethanol Policy Change Sparks Sugar Stocks Rally up to 20% in FY26

Sugar stocks saw a big jump in trade on September 2, 2025, with some rising as much as 20%. The rally came after the government decided to remove limits on ethanol production from sugarcane juice, syrup, and molasses for the 2025-26 season.

Earlier, restrictions were imposed due to a low sugarcane supply. However, with two years of favourable monsoons and increased cane availability, the government has now permitted sugar mills and distilleries to produce ethanol freely.

This policy shift gave a strong boost to investor confidence. Big names like Balrampur Chini, Shree Renuka Sugars, Bajaj Hindusthan Sugar, and Uttam Sugar surged in early trade, while small-cap stocks such as Rajshree Sugars hit the upper circuit.

Key Highlights of Sugar Stocks Rally

• The government removed restrictions on ethanol production from sugarcane juice, syrup, and molasses for the 2025-26 supply year.
• Better sugarcane output is expected after two years of good monsoon rains.
• Sugar stocks surged up to 20% in early trade on September 2, 2025.
• Balrampur Chini (+7%), Shree Renuka Sugars (+15%), Bajaj Hindusthan (+12%), Uttam Sugar (+9%), Dhampur Sugar (+10%), and Triveni Engineering (+4.5%) were among the big gainers.
• A small-cap stock like Rajshree Sugars & Chemicals hit the 20% upper circuit at ₹45.26.
• The move supports India’s ethanol blending policy (EBP-20), which helps reduce oil imports and boosts farmer incomes.
• The Supreme Court dismissed a plea against the nationwide rollout of E20 petrol, clearing the path for the implementation of the blending policy.

Policy Background of Sugar Sector News

The government had earlier restricted ethanol production from sugarcane juice and molasses due to a drop in cane supplies. With output now expected to improve, the decision is seen as a supportive step for both the sugar industry and farmers.

Officials said the Department of Food and Public Distribution will regularly monitor the amount of sugar diverted for ethanol production. This will ensure sufficient availability of sugar for domestic consumption.

This change also comes in the backdrop of the Supreme Court dismissing a plea against the rollout of 20 per cent ethanol-blended petrol (E20). The court noted that the policy had already been examined in detail and emphasised that the program would help farmers while reducing India’s reliance on fuel imports.

Conclusion

The government’s decision to lift restrictions on ethanol production has turned sentiment positive for both sugar companies and farmers. With cane output expected to improve, the policy is anticipated to provide the industry with more flexibility while supporting India’s ethanol blending program.

For now, sugar stocks have reacted sharply to the announcement. However, the real impact will depend on how production, blending, and domestic sugar availability balance out in the upcoming season.

Source: MoneyControl

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