homebusiness Newscompanies NewsHere's why sugar companies are rushing to ramp up ethanol production capacity

Here's why sugar companies are rushing to ramp up ethanol production capacity

The demand for ethanol blending is estimated to reach 1,016 crore litre by 2026 from the current 425 crore litre, clocking a CAGR of 25.1 percent, says a report by Centrum Broking.

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By Dipikka Ghosh  Jun 13, 2022 4:20:54 PM IST (Updated)

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Here's why sugar companies are rushing to ramp up ethanol production capacity
India's largest sugar refiner and ethanol producer Shree Renuka Sugars says about 20 percent of its revenue comes from ethanol which may increase to 30-35 percent as it doubles up the capacity.

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"Once we double up our capacity, I am sure revenue from ethanol would be closer to about 30-35 percent of our overall revenue," said Atul Chaturvedi, executive chairman, Shree Renuka Sugars, in an interview with CNBC-TV18.
Ethanol is a renewable fuel made from sugar cane. In a bid to utilise the excess sugar cane stock with sugar companies, the government of India had encouraged firms to produce ethanol, which can be blended with petrol and used as fuel in vehicles. The uses of ethanol are widespread. It is also used in manufacturing of drugs and cosmetics, among others.
Shree Renuka Sugars has invested around Rs 700 crore in expanding its ethanol capacity and the project is now in the last stage of commissioning, the company said. The investment in ethanol expansion accounts for about 10 percent of the company's sales for the year ended March 2022 which stood at Rs 6,432.60 crore.
The company's focus on ethanol capacity expansion is in line with plans of others firms as the government has advanced the target for 20 percent ethanol blending in petrol — also called E20 — to 2025 from 2030. E20 is set to be rolled out from April 2023.
The government has come up with Ethanol Blending Programme (EBP) due to volatility in crude prices resulting in fiscal uncertainty, environmental
hazards from fossil fuels consumption and energy security concerns.
As per government estimates, a successful ethanol blending program can save the country forex of US $4-4.5 billion per annum, i.e., more than Rs 300 billion.
The demand for ethanol blending is estimated to reach 1,016 crore litres by 2026 from the current 425 crore litres, clocking a CAGR of 25.1 percent, says a report by Centrum Broking.
Presently, the overall ethanol supply is driven by sugar cane-based ethanol. The sugar cane-based ethanol is likely to retain a significantly higher share in the total supply at least until 2024, as per Centrum Broking. Post 2024, there could be a gradual rise in grain-based ethanol.
Other companies such as Balrampur Chini are also embarking on a similar journey to expand ethanol capacity. In an earlier interview to CNBC-TV18, Pramod Patwari, the chief financial officer of Balrampur Chini Mills, had said, “We have installed a capacity of 19 crore litre of ethanol and we are increasing this capacity to 35 crore litre, which will come on ground in November 2022.”
Dalmia Bharat Sugar and Industries too has ethanol capacity of 240KLPD (kilo litre per day).
What also works in the companies' favour is that the oil marketing companies (OMCs) are willing to pay Rs 1.5 extra per litre to ethanol suppliers.
Chaturvedi said, “OMCs have recently come up with a circular saying that they will be giving approximately Rs 1.5 per litre extra to companies that are going to be supplying ethanol to them during June to September. So, ethanol is in big demand, exports look to be robust.”
Fuel retailers, in a letter to manufacturers, said that they would provide monetary relief to ethanol producers to compensate for high energy costs to boost biofuel production.
AISTA welcomed oil marketing companies’ decision to provide monetary relief to ethanol producing sugar mills

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