India sugar stocks slide as government halts sugar diversion to ethanol (updated)

E I D-Parry (India)

Mon 05:34

Adds paragraphs 4-7
By Bharath Rajeswaran
Oct 19 (Reuters) - Indian sugar stocks fell in early trade on Monday after the government directed oil marketing companies to reduce sugar diversion for ethanol production to zero for the 2026/27 supply year.
The latest ethanol tender excludes supplies produced from sugarcane juice, sugar syrup and B-heavy molasses, a sugar-rich by-product of cane crushing.
Balrampur Chini Mills BACH.NS, EID Parry EIDP.NS, Triveni Engineering and Industries TREI.NS, Bajaj Hindusthan Sugar BJHN.NS, Shree Renuka SRES.NS and Dhampur Sugar DAMS.NS fell between 2% and 6% in morning trade.
The decision limits companies' ability to shift cane and molasses between sugar and ethanol depending on market conditions, potentially weakening margins and reducing the return on ethanol-capacity investments.
The move is aimed at increasing domestic sugar availability and easing record high prices in India, the world's biggest sugar consumer. 
Sugar prices have risen more than 10% amid the festive season, raising concerns over near-term food price pressures before the main crushing season begins, said Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services.
The decision reflects the government's priority of protecting food supplies after concerns that weak rainfall in key producing states could curb output, analysts from Motilal Oswal and Choice Broking added.

 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))