G20 biofuel initiative: Sugar stocks Shree Renuka, Balrampur Chini, EID Parry rally up to 7%

Shares of sugar companies witnessed a surge in buying today after Prime Minister Narendra Modi launched the Global Biofuel Alliance (GBA) on the sidelines of the G20 Summit on Saturday, which has India, the United States, and Brazil as its founding members. The alliance intends to work together to take an initiative at a global level to take ethanol blending in petrol up to 20%. Sugarcane-based ethanol is one of the most significant sources of biofuels.

Boosted by the development, sugar stocks including Shree Renuka, Balrampur Chini, EID Parry, Dalmia Bharat Sugar, Dhampur Sugar Mills, Avadh Sugar & Energy, Dhampur Sugar Mills, and Uttam Sugar rallied up to 7% in intraday amid hope that Indian sugar industry will gain from the decision to increase ethanol blending with petroleum products.

Among individual stocks, Shree Renuka Sugars, the most valued company in this sector in terms of market cap, gained as much as 7.2% during the trade so far. The other sectoral heavyweights EID Parry, Balrampur Chini, Triveni Engg, Bajaj Hindusthan, Dalmia Bharat Sugar, Dhampur Sugar Mills rose in the range of 2% to 5%.

"Since India is the second largest producer of sugar, after Brazil, the Indian sugar industry stands to gain from the decision to increase ethanol blending with petroleum products. Sugar prices have gone up by around 3% during the last one month, the prospects for sugar companies have improved. But the good news is already in the price with many sugar stocks trading at 52-week highs," says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The Global Biofuel Alliance is an initiative by India as the G20 Chair, which intends to expedite the global uptake of biofuels through facilitating technology advancements, intensifying utilisation of sustainable biofuels, shaping robust standard setting and certification through the participation of a wide spectrum of stakeholders.

The alliance will also act as a central repository of knowledge and an expert hub. It aims to serve as a catalytic platform, fostering global collaboration for the advancement and widespread adoption of biofuels.

“Our proposal is to take an initiative at a global level to take ethanol blending in petrol up to 20%. Or alternatively, we could work on developing another blending mix for the greater global good, one that ensures a stable energy supply while also contributing to climate security. In this context, today, we are launching the Global Biofuel Alliance,” says the PM, while launching the GBA along with the leaders of Singapore, Bangladesh, Italy, USA, Brazil, Argentina, Mauritius and UAE, on the sidelines of the G20 Summit in New Delhi.

Brazil, India, and the United States, as leading biofuel producers and consumers, have been working together during the last few months towards the development of a global biofuels alliance along with other interested countries.

The central government has already notified National Policy on Biofuels, 2018, which envisaged a target of 20% blending of ethanol in petrol by ethanol supply year 2025-26. Accordingly, oil marketing companies (OMCs) are permitted to sell up to 20% ethanol blended petrol. At present, under the Ethanol Blended Petrol (EBP) Programme, ethanol blended petrol is being sold across all states of the country.

Under EBP Programme, OMCs have saved 433.6 crore litres of petrol on account of ethanol blending during the Ethanol Supply Year (ESY) 2021-22 resulting in an approximate savings of more than ₹20,000 crore of foreign exchange.

DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.