Amid the closure of some grain-based ethanol plants due to the sudden halt of subsidised rice by the Food Corporation of India (FCI), the sugar industry is optimistic about increasing its share if the government asks for the industry to meet the 20 per cent ethanol blended petrol (EBP) target by 2025.

“Whatever ethanol supply has been received by OMCs so far, 81 per cent has come from sugarcane-based plants, and only 19 per cent has been contributed by grain-based plants,” said Atul Chaturvedi, executive chairman of Shree Renuka Sugars. This shows the vibrancy of the sugarcane-based plants to meet the challenge of EBP, he said.

Out of 5.53 billion litres contracted by oil marketing companies (OMCs) in the current ethanol year (December 2022–October 2023), 3.51 billion litres have been supplied by distilleries until July 9, achieving 11.75 per cent blending. The target for the current year is 12 per cent.

‘Revisit plan’

Chaturvedi said there is a need to revisit the original plan of what the contribution of sugarcane- and grain-based plants should be to the overall supply. “Since sugar mills are in a position to scale up, the government should raise their (sugar mills) share of ethanol to 8 billion litres,” he said, adding the industry is in a position to ramp up capacity.

As per the original plan, the government estimates the requirement for ethanol to be 10.16 billion litres to achieve the 20 per cent ethanol blending with petrol (EBP) target by 2025. Out of this, 5.5 billion litres are estimated to come from sugarcane-based plants and 4.66 billion litres will be shared by grain-based plants, he said.

Increasing acreage

“Since the entire sugar sector is controlled, it is possible to increase the area under sugarcane if the government is serious about meeting the target. It cannot depend either on rice or maize, as both are key for human consumption and feed,” said another sugar industry official. Neither the government will afford to see a price increase in rice consumed by the general public beyond a certain point, nor the high feed cost that may result in a price rise in dairy and eggs, the official said.

In the days to come, distilleries that have been dependent on FCI rice will have to source alternate feedstock or shut down operations, said Chaturvedi. He pointed out that while FCI rice is subsidised, there is no such subsidy for sugar mills.

A sugar trader said it is not correct to sell rice for ethanol at ₹20/kg and in the open market at minimum ₹31/kg, which is the reserve price in the FCI auction.

In the Indian context, there will always be a question mark over the policy of making rice available for ethanol as the country does not look to have much surplus, industry experts said. Many experts warned that the people who have set up only grain-based plants may have to face the consequences in the days to come.

After the ban on export of non-Basmati rice amid fear of El Nino disrupting domestic production, the government has stopped releasing the rice from FCI for production of ethanol since July 15, leading to the closure of many plants in Uttar Pradesh, Jharkhand, and Maharashtra.