India has taken a significant step toward boosting its ethanol production and meeting its ambitious energy goals. The country has lifted restrictions on sugar mills and distilleries using cane juice to make ethanol, a move that is likely to have far-reaching implications for the global sugar market.
The decision, announced by the Indian food ministry, will allow ethanol producers to utilize sugarcane juice, B-heavy and C-heavy molasses during the 2024-25 year, starting in November. This move marks a reversal of the restrictions imposed in the previous year, when the government sought to increase sugar reserves after poor rainfall impacted crops.
The easing of these restrictions is expected to prolong export curbs from India, the world’s second-largest sugar grower. This, in turn, is likely to tighten global supply and potentially drive up sugar prices. The decision comes at a time when benchmark sugar prices have already seen a rally due to widespread fires in Brazil, the world’s top producer, which have led some mills to reduce their production estimates.
This move is aligned with Prime Minister Narendra Modi’s ambitious goal of increasing the proportion of ethanol in gasoline blends to 20% by the year starting November 2025. The government’s decision has been met with enthusiasm by the Indian sugar industry, with shares of sugar millers experiencing significant gains on Friday following the announcement. Triveni Engineering and Industries Ltd. saw a surge of over 10%, while Shree Renuka Sugars Ltd., Bajaj Hindusthan Sugar Ltd., Dwarikesh Sugar Industries Ltd., and Balrampur Chini Mills Ltd. all saw gains of close to 10%. A Bloomberg gauge of the top 15 sugar millers reached a record high.
In a separate order, the Indian government has also authorized grain-based ethanol producers to purchase rice from state reserves via an electronic auction conducted by the Food Corp. of India. The nation plans to sell up to 2.3 million tons of rice during August and October. This move further underscores the government’s commitment to promoting ethanol production and reducing reliance on fossil fuels.
