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New Delhi
The Indian government on Thursday banned sugar mills and distilleries from using sugarcane juice or sugar syrup for the production of ethanol with immediate effect to ensure adequate availability of sugar for domestic consumption.
However, the Ministry of Consumer Affairs, Food and Public Distribution said in its order that supply of ethanol from B-heavy molasses will continue under existing offers received by oil marketing companies (OMCs) in the ethanol supply year 2023-24 (November 2023 to October 2024). B-heavy molasses is the syrup leftover in the second molasses - the first one is left after sugar is crystallised out.
The government has allowed OMCs to accept ethanol already produced directly from sugarcane juice or syrup.
“By this restriction, about 2.5 million tonnes (mt) of additional sugar will be available in the domestic market, which may flare up the estimated surplus of the season to about 4 mt over and above domestic demand and carry-forward stock,” said an industry official.
The committee of ministers this week decided that top priority should be given to sugar production this year, an official source said. The government does not want to take any chance due to General Elections scheduled in April-May 2024 and any adverse impact of El Nino on sugarcane crop next year, the source said.
Stocks suffer hit
Stock market bears took advantage of the situation by crushing sugar companies stocks soon after the announcement. Among the companies, Uttam Sugar Mills declined by 8.38 per cent to ₹408.35 on the NSE followed by EID Parry (down 6 per cent), Dalmia Bharat Sugar & Industries (5.52 per cent), Balrampur Chini Mills (5.37 per cent), DCM Shriram Industries and Triveni Engineering Industries (4.8 per cent each) . Other such as Magadh Sugar, Avadh Sugar, Ugar Sugar Works, Bajaj Hindusthan, Sakthi Sugars, Dwarikesh Sugar and Dhampur Sugar fell between 3 per cent and 4.5 per cent.
Sources said the Petroleum Ministry has expressed its reservation on the proposal to ban sugarcane juice fearing the 15 per cent ethanol blending with petrol (EBP) target for 2023-24 will be missed. In 2022-23, the government achieved a 12 per cent EBP target for which 540 crore litres of ethanol were supplied by sugar mills and distilleries.
Official sources said there would be no discontinuation of B-heavy molasses as such a step will further reduce the availability of ethanol.
Earlier the government was estimating sugar production this season at 29-30 mt against annual domestic consumption of about 28 mt and last year’s output of nearly 33 mt. The opening stock as on October 1 was 5.7 mt from last year’s production. which needs to be maintained at around 6.5-7 mt to meet any exigency for first two and half months of the crushing season starting October.
Policy tweak vs ban
Many industry officials suggested that the ethanol price policy may be tweaked instead of imposing a blanket restriction, as sugar mills can choose the best profitable means to produce ethanol from sugarcane juice or syrup or B-heavy molasses or C-heavy molasses.
For ESY 2022–23, the OMCs floated a tender for 599.7 crore litres of ethanol against which letters of intent (LoIs) were issued for 564.45 crore litres as of August 2023. According to industry sources, mills were awarded orders to produce about 270 crore litres - 130 crore litres (equivalent of 2.2 mt of sugar) from direct juice or syrup and 135 crore litres (equivalent of 1.1 mt of sugar) from B-heavy molasses. About 290 crore litres from grain-based source (including dual-feed based sugar plants) were also finalised in the first round (cycle 1) of supply tender.
The OMCs are yet to announce ethanol prices for the 2023-24 season and distilleries have agreed to supply on the condition that the difference (from last season’s rates) would be paid.
Price variation
Ethanol price varies according to the raw material used. In the 2022-23 season (December to October), ethanol from direct sugarcane juice/syrup was priced Rs 65.73/litre; it was Rs 60.73/litre for B-heavy molasses and Rs 49.41/litre for C-heavy molasses.
Similarly, the rates were Rs 66.07/litre for maize, Rs 64/litre for damaged rice, Rs 58.50/litre for FCI’s subsidised rice supplied at Rs 20/kg (since discontinued).
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