Sugar stocks surge after CCEA approves a mechanism for procuring ethanol

Seven sugar stocks surged 2.69% to 14.13% at 11:50 IST on BSE after CCEA approved a mechanism for procurement of ethanol by PSU OMCs to carry out the ethanol blended petrol program.

Meanwhile, the BSE Sensex was down 255 points, or 0.91%, to 27,577.96.

Among sugar stocks, Balrampur Chini Mills (up 5.03%),, Shree Renuka Sugars (up 6.23%), Sakthi Sugars (up 7.25%), Rana Sugars (up 3.44%), Simbhaoli Sugars (up 14.13%), Triveni Engineering & Industries (up 2.69%) and Dwarikesh Sugar Industries (up 5.47%) surged.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi on Wednesday, 10 December 2014, has approved a mechanism for procurement of ethanol by Public Sector oil marketing companies (OMCs) to carry out the ethanol blended petrol (EBP) program. The CCEA approved replacing the current procedure on ethanol viz. delivered price of ethanol may be fixed in the range of Rs 48.50 per litre to Rs 49.50 per litre, depending upon the distance of sugar mill from the depot/installation of the OMCs. The rates proposed would be delivered price at depot location and inclusive of all central and state taxes, transportation costs, etc which would be borne by the ethanol suppliers. The OMCs will incorporate "Supply or Pay" clause duly backed up with bank guarantee in their supply agreement with ethanol suppliers. OMCs will sign MOU with the state governments for a comprehensive system for uninterrupted inter-depot transfer of ethanol within a State. This may include annual excise permits to OMCs for movement of ethanol and other relevant measures.

The present mechanism of procurement of Ethanol based on a benchmark price decided by OMCs may be replaced by a new mechanism of uniform price of Ethanol declared for each sugar year. Consumer Affairs, Food & Public Distribution has stated that the ex-sugar mill price of Ethanol is around Rs 42.02 per litre. Besides, suppliers are required to incur additional cost of around Rs 6-8 per litre depending on the applicable state VAT, distance of sugar mill/distillery from OMCs' depot and the Excise duty. Thus, for Ethanol suppliers, the landed cost of Ethanol at the OMCs depots would be around Rs 49 per litre.

EBP Programme was launched in 2003, which was extended to the entire country except NE States, J&K, A&N Islands and Eakshdweep, from 1 November 2006. OMCs were directed to sell 5% ethanol blended petrol subject to commercial viability. A National Policy on Bio-fuels was also notified by the Government in 2009 with the objective to ensure that minimum level of bio-fuels is readily available to meet the demand at any given time.

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