India sugar stocks tumble after government bans ethanol diversion for 2026-27

Shares in India's leading sugar companies fell sharply after the government directed oil marketing companies to reduce the diversion of sugar and sugarcane-derived materials for ethanol production to zero for the 2026-27 season.

Balrampur Chini Mills, EID Parry and Shree Renuka Sugars were among the producers whose stocks declined by between two and six percent following the announcement. Bajaj Hindusthan Sugar was among the hardest hit, with its shares dropping more than five percent in early trading.

The new procurement rules prohibit the use of sugarcane juice and B-heavy molasses as feedstocks in ethanol manufacturing, marking a significant policy reversal for an industry that had grown to rely on the blending programme as a supplementary revenue stream. The government indicated a strategic shift towards grain-based ethanol production instead, redirecting the supply chain away from the sugar sector.