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Govt directs mills to not use sugarcane juice for ethanol production to rein in prices
In a bid to ensure a sufficient supply of sweeteners for domestic consumption and rein in prices, the Centre on Thursday instructed all sugar mills and distilleries to refrain from using sugarcane juice for the production of ethanol.
In a bid to ensure a sufficient supply of sweeteners for domestic consumption and rein in prices, the Centre on Thursday instructed all sugar mills and distilleries to refrain from using sugarcane juice for the production of ethanol.
In a letter to the Managing Directors and Chief Executive Officers of all sugar mills and distilleries, the food ministry said that the supply of ethanol to oil marketing companies from B-heavy molasses will continue.
"In exercise of powers conferred under clause 4 & 5 of the Sugar (Control) Order 1966, it is directed to all sugar mills and distilleries not to use sugarcane juice /sugar syrup for ethanol in ESY (ethanol supply year) 2023-24 with immediate effect. "Supply of ethanol from existing offers received by Oil Marketing Companies (OMCs) from B-Heavy molasses will continue," the Food Ministry said in the letter.
The sugar industry is seeking further clarification from the government on two fronts following this notification.
One: what happens to current tenders of approximately 270 crore litres (around 3-3.2 m tonnes of sugar) which are in place—would these tenders be scrapped or converted to B-heavy ethanol?
Two: the ‘immediate effect‘ clause in the directive. Sugar mills tell us that running mills cannot be shut down suddenly. Such exercises usually take between 48 and 72 hours to be implemented, and for ethanol extraction from sugar juice to trickle to an end.
The industry is yet to get the pricing for the ethanol for the new season (2023–24). The tenders are floated and as prices are announced, the amount is calculated.
The industry hopes that the government's measure is a short-term one that may not extend beyond this season. They point out that a lot of investments have already been made into ethanol making, in line with the government's previously stated vision for biofuels.
Prashant Biyani, VP-Institutional Equity Research and Sector Lead for Agri-Inputs, Sugar, and Hotels at Elara Securities, expressed concerns about the impact on sugar production and ethanol volumes. He stated, "Sugar production for the companies will increase. It can increase to the extent of 10-15% and ethanol volumes are going to be lower by around 20-25% over the next 18 months period. For H2FY25, the numbers may not be that impacted, but the main impact could be in H1FY25."
While the industry waits for the clarifications requested, we learn that stakeholders have also sought a meeting with the relevant government departments to put their case forward.
(Edited by : Ajay Vaishnav)
First Published: Dec 7, 2023 4:15 PM IST
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