Sugar Stocks Surge Alert! India Greenlights Exports & Slashes Molasses Duty - Is Your Portfolio Ready?

The Indian government has officially permitted the export of 1.5 million tonnes of sugar for the upcoming 2025-2026 sugar season, which commences in October. While the industry had requested an export quota of 2 million tonnes to manage the current year's surplus production, this approved amount is seen as a step towards managing inventory.

In a significant move to support the sugar sector's financial health, the government has also decided to eliminate the 50% export duty levied on molasses, a key by-product of sugar manufacturing. This decision is primarily intended to improve the liquidity of sugar mills, enabling them to clear payments to sugarcane farmers more promptly.

Madhav Shriram, Director at DCM Shriram Industries, highlighted that sugar is often treated as a sensitive commodity in Free Trade Agreements and urged for better market access for Indian sugar exports. He also noted India's success in achieving 20% ethanol blending ahead of schedule, which has garnered international attention and could help absorb surplus sugar.

Recent stock performance shows a downturn for several sugar companies, with Balrampur Chini Mills down 10% and Dhampur Sugar down 7% in the past month, while Mawana Sugar, Shree Renuka Sugar, and Dwarikesh Sugar Industries have seen declines between 5% to 9%.

Impact: This policy update is expected to provide a much-needed boost to the sugar industry by opening export avenues and improving cash flow through the removal of molasses duty. It could positively influence the stock performance of sugar companies, provided the export quota is effectively utilized and market conditions remain favorable. The focus on ethanol also signals strategic diversification. Rating: 7/10

Difficult Terms: Sugar season: The period in India when sugarcane is harvested and processed into sugar, typically beginning in October. Surplus domestic production: Producing more sugar within India than is consumed domestically. Molasses: A viscous, dark syrup by-product of sugar production, used in making ethanol, rum, and animal feed. Liquidity: The availability of cash or easily convertible assets to meet short-term financial obligations. Free Trade Agreements (FTAs): Pacts between countries to reduce trade barriers. Ethanol blending: Mixing ethanol with gasoline to create a biofuel.