Rising for the second straight session, sugar stocks Friday surged up to 20 per cent on the government's announcement of hike in ethanol price for blending in petrol by 25 per cent.
In the previous trading session, shares of sugar firms had registered a rise of around 18 per cent.
The government on Wednesday approved an over 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol in a bid to cut surplus sugar production and reduce oil imports.
Avadh Sugar & Energy, Ponni Sugars (Erode), Magadh Sugar & Energy, Simbhaoli Sugars, Rajshree Sugars & Chemicals, Dalmia Bharat Sugar & Industries and Uttam Mills rose as much as 20 per cent each and hit their upper circuit limits on the BSE.
Shares of Shree Renuka Sugars surged 16.17 per cent and Thiru Arooran Sugars jumped 15.63 per cent. K M Sugar Mills rose 14.04 per cent.
The Cabinet Committee on Economic Affairs raised the procurement price of ethanol derived from 100 per cent sugarcane juice to Rs 59.13 per litre from the current rate of Rs 47.13.
The government's move of raising ethanol price for blending in petrol would help sugar mills quickly release arrears of cane farmers, which stands at over Rs 13,000 crore. As much as 40 per cent of these dues are in Uttar Pradesh alone.
Ethanol so extracted would be doped in petrol to cut reliance on imports. The government is looking at scaling up the blending to 10 per cent in the next couple of years from 4-5 per cent now.