The differential pricing for ethanol produced by distilleries linked to sugar mills is a landmark move by the government to support not only the sugar industry but also the Ethanol Blended Fuel Programme, according to industry representatives.

The Cabinet on Wednesday hiked the price of ethanol conventionally produced from C-Heavy molasses, a by-product of sugar production, to ₹43.70 a litre (₹ 40.85 previously) for supply to oil companies for blending with automobile fuel. In an unprecedented move it also announced a higher price of ₹47.49, apart from GST and transportation charges, for ethanol distilled from B-Heavy molasses. This will help divert the sugar-rich intermediate product to ethanol-making instead of sugar.

Even if to a small extent, this will help siphon off some of the excess sugar production in the coming 2018-19 sugar season (October-September) to ethanol.

The Indian Sugar Mills Association, in an earlier representation to the government, had pressed for ₹52 a litre for ethanol from B-heavy molasses considering that it is a costlier raw material. However, sugar and ethanol industry representatives have welcomed the move.

‘Positive step’

Atul Mulay, President — Bioenergy, Praj Industries, said this is a positive step in encouraging EBP. The Government has provided a relief by hiking the basic price and allowing a differential, higher price, for the second-generation ethanol from B-heavy molasses.

A senior executive in a leading sugar company said the government is moving closer to arriving at a solution to the `vexatious issue’ of over production of sugar and price crash. The differential pricing will help balance sugar production by diverting some of the raw material to ethanol instead of adding to the prevailing glut in sugar. Global players like Brazil produce ethanol directly from sugarcane juice to during times of oversupply.

The industry body, ISMA had previously estimated that as a thumb rule about 35 crore litres of available distillery capacity can be used to process B-Heavy molasses, which will be the equivalent of diverting about five lakh tonnes of sugar.

With domestic sugar production at an excess of 320 lakh tonnes and an equal, if not higher production, expected in the coming season, the government is scrambling to arrest the slide in sugar prices to enhance sugar mills’ liquidity and enable them pay farmers. Sugar mills owe over ₹ 20,000 crore to farmers for the sugarcane supplied.

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