Is the government going aggressive on ethanol blending and what does that mean for sugar stocks?

Government will now instruct oil companies to sell up to 20% ethanol blended petrol from April 2023. That is huge for sugar stocks because it opens up a profitable avenue for them. Then can have a business model that is not dependent on the vagaries of sugar supply and sugar prices. The government has been pushing for ethanol production with surplus sugar production depressing sugar prices and rising dues of sugarcane farmers.

Increased ethanol blending with petrol will reduce pollution and strengthen India’s balance of trade as it reduces India’s dependence on crude imports. Currently, India imports 85% of its daily crude needs. Ethanol blending is up from 1.53% in FY14 to 8.5% in FY21 and now to 20% by FY23. This will also increase consumption of ethanol in the ethanol producing states and the adjoining regions.