Jobaaj Stories
The starting of the Ethanol Blended Petrol (EBP) program laid the foundation for alternative and environment-friendly fuel usage. Ethanol is a renewable fuel obtained from sugarcane, which with its production growth, would cater to a larger market share for the sugar stocks and further decrease fuel prices.
Effect of 48th GST Meeting
The 48th GST meeting held in November 2022 reduced the GST on Sugar from 18% to 5% to achieve their target of increasing the ethanol blending to 20%. This news impacted the sugar stocks causing high variations at the upper end.
Although this impacted the companies in the short run, the central government's goal to expand its ethanol blending from the current 10% to roughly 25% by the end of 2025 is a long-term trigger, which is in favor of sugar stocks.
Execution of the EBP Programme
The EBP program was launched in 2003, starting in 9 states with 5% blending. Further, in 2006 the Ministry of Petroleum and Natural gas directed the Oil Marketing companies to sell the 5% blended petrol to the notified 20 States and 4 Union Territories.
By 2022, this was extended towards the whole nation, excluding Andaman and Nicobar Islands and Lakshadweep, while achieving a target blending of E10 (10% ethanol and 90% Petrol). Furthermore, according to Sangeet Singla (Director of Sugar and Vegetable oil) - by 2025, 25% ethanol blends will be achieved, with ethanol blending reaching 12% this year.
Effects of Blending Ethanol
The Indian government has promoted blending ethanol with petrol to reduce the country's dependence on imported crude oil, reduce pollution, and support domestic ethanol production. The impact of blending ethanol on the Indian stock market is complex and multifaceted.
In addition, ethanol producers could also benefit from the revised ethanol blend policy. The increased demand for ethanol could lead to higher revenues and profits for ethanol producers leading to higher stock prices for these companies and a positive impact on related investments.
However, it's worth noting that the impact of the revised ethanol blend policy on sugar stocks and related investments will depend on a range of factors, such as the implementation of the policy, global sugar prices, and the overall economic and political environment. Therefore, it is hard to make specific predictions about the impact of this policy on the stock market in the long run, but 2023 will face some sweetness from the revision.
- Charu Kapoor
