Why this tax cut matters for sugar stocks?

Sugar stocks jumped up to 4% intraday on Thursday after the government removed excise duty on higher ethanol-blended petrol.

Companies like Balrampur Chini Mills, Dwarikesh Sugar Industries, and Dhampur Sugar Mills led the gains, while ethanol-focused Praj Industries also opened higher.

What this means: the government has removed excise duty on higher ethanol-blended petrol variants: E22, E25, E27 and E30.

These fuels contain 22% to 30% ethanol, compared with the current E20 standard. The move comes after India achieved its 20% ethanol blending target and is aimed at driving the next phase of ethanol adoption.

The tax waiver makes these higher ethanol blends cheaper to produce and sell, encouraging oil companies to roll them out more widely.

Why this matters: the move is a big positive for sugar and ethanol companies, many of which have invested heavily in expanding ethanol production.

Higher demand for ethanol could help these companies earn more while making better use of their plants, which are currently operating at only about 50% capacity.

It also comes at a time when global oil supplies are under pressure due to disruptions around the Strait of Hormuz, helping India rely more on homegrown fuel and less on imported crude oil.

The larger push: in May, the government introduced Indian standards for higher ethanol-blended fuels like E22, E25, E27 and E30. It has now removed excise duty on these fuels to encourage their production and adoption.

Earlier, on April 28, the Ministry of Road Transport and Highways proposed changes to the Central Motor Vehicles Rules to allow even higher ethanol blends like E85 (85% ethanol) and E100 (100% ethanol), along with biodiesel and hydrogen-blended fuels.