Why Are Sugar Companies Disappointed With Ethanol Contract Allocations?
Two prominent players in the sugar and ethanol value chain — BCL Industries and Gulshan Polyols — have expressed dissatisfaction with the latest ethanol allocation received from Oil Marketing Companies (OMCs). The lower-than-expected order sizes could impact near-term revenue visibility, though both firms remain confident in medium-term demand driven by India’s energy transition goals.
OMCs such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum invite ethanol supply tenders periodically to meet blending targets under the government’s Ethanol Blended Petrol (EBP) program. Ethanol is a biofuel produced mainly from sugarcane molasses, grains, or industrial feedstock — blending it with petrol reduces India’s crude oil import bill while supporting farmers through stable sugar prices.
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According to management commentary shared with NDTV Profit, Gulshan Polyols’ leadership stated that the recent order win amount was “lower than anticipated.” The allocation received ensures operations at around 70% capacity utilization, translating to revenue visibility of roughly ₹1,200 crore for the upcoming period.
In simple terms, capacity utilization measures how much of a company's installed production capacity is being actively used. A 70% utilization means that 30% of its potential output remains untapped — often due to lower orders, logistical bottlenecks, or pricing adjustments.
| Metric | Value | Comment |
|---|---|---|
| Order Utilization | 70% | Below expected capacity |
| Revenue Visibility | ₹1,200 Cr | Ensured under current allocation |
| Expected Orders | ~100% Capacity | Shortfall due to OMC distribution |
For BCL Industries, the management tone mirrored Gulshan Polyols’ sentiment — both companies hoped for higher order allocation to improve production efficiency and profitability. The ethanol segment has been a key contributor to their recent financial performance, with steady growth supported by favorable government policies on ethanol blending and carbon reduction goals.
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While the current allocation disappointment may weigh on near-term earnings sentiment, experts believe structural demand remains intact. India aims to achieve 20% ethanol blending by 2025–26, creating a long-term revenue opportunity exceeding ₹1 lakh crore annually for sugar mills and ethanol producers combined.
However, in the short term, investors should monitor how these companies adjust to fluctuating order patterns from OMCs, manage feedstock costs, and balance capacity utilization. Both BCL Industries and Gulshan Polyols have diversified feedstock sources, including grain-based ethanol, which helps cushion supply volatility from sugarcane-based inputs.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that while the ethanol allocation shortfall creates temporary headwinds for BCL Industries and Gulshan Polyols, the overall growth outlook for India’s ethanol sector remains encouraging. The government’s push toward renewable blending and rural income support ensures long-term value creation for well-managed producers.
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Related Queries on Ethanol Sector
- How Do OMC Allocations Impact Ethanol Producers?
- What Is Capacity Utilization and Why Does It Matter?
- Which Sugar Stocks Benefit Most From India’s Blending Policy?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
