Breaking News
New Delhi, August 30: The recent removal of restrictions on ethanol production from B-heavy and C-heavy molasses and sugarcane juice is expected to stabilize ethanol production volumes for sugar companies, according to DAM Capital, a Mumbai-based financial advisory firm.
On Thursday, the food department lifted restrictions that had been in place since December 2023 due to rising sugar prices ahead of the Lok Sabha election. DAM Capital believes this move will clarify ethanol blending and enable full utilization of distillery capacity by sugar mills, leading to significant earnings growth from Q3FY25 onward.
DAM Capital anticipates a sector re-rating and plans to assign higher earnings multiples to companies within their coverage. They predict that sugar inventory will exceed 8 million tonnes by October, surpassing the minimum requirement of 5 million tonnes. With gross sugar production expected to reach 32 million tonnes, which is higher than the 29 million tonnes consumed, more than 5 million tonnes of sugar will be available for ethanol production.
The firm estimates that 4-5 million tonnes of sugar will be diverted to ethanol production, yielding 4.5 to 5.0 billion liters of ethanol. Additionally, the food department has allowed distilleries to participate in the FCI rice auction, with up to 2.3 million tonnes of rice available for ethanol production.
This policy change is expected to support the government's goal of 20% ethanol-blended petrol by 2024-25 and 30% by 2029-30. Ethanol production in India primarily comes from cane juice (25-30%) and B-heavy molasses (60-65%), with the remainder from C-heavy molasses and grains.
The advancement of the E20 fuel target to 2025 aligns with India's broader environmental commitments made at the COP26 summit, including achieving 500 GW of non-fossil electricity capacity, generating half of energy from renewables, reducing emissions by 1 billion metric tonnes by 2030, and reaching net-zero emissions by 2070.
.png)