Agree… this is for the elections. after elections ethanol procurement will be back. That is why the govt order is only for 1 year 2023-24 – while they very well know that cane shortage will be there for 2 years. Govt cannot take the chance of sugar price going up too much like onion or tomatoes. Sugar prices had gone up like this in 2017/2018.
Wholesale prices have gone up by Rs. 2 to Rs 42/ 43 over the last one month – this can be easily verified by just speaking to any trader in the wholesale mkt. In fact it has gone up further after the announcement of ethanol restriction. Most likely it will go up by a few more rupees by Jan/ Feb when the output from Maharashtra and Karnataka is known.
Ethanol production will be back in 2024/25 as Govt. has to reduce reliance on imported fuel – with rupee depreciation oil will become more expensive going forward. And farmers get much better returns from sugarcane. In UP, SAP was not increased last year but acreage has increased by 7 to 10%. It is well known that farmers are fine with Rs. 350 SAP also – but due to election year Govt will increase it. But again SAP wont be increased for many years and then ethanol margins will be high and stable. In period of high sugar prices (domestic or international) companies can switch back to sugar – like it is done in Brazil.
If you take a medium/ long term view on sugar sector, it is going to do well – it can be multibagger. You have to just stay put !!
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