The Indian government may allow complete freedom to sugar mills to decide the amount of sugarcane they want to divert for ethanol before the commencement of the new season in October. The mills could base their decision on the price of the biofuel, which is likely to be announced before November.
However, the option of allotting distillery-wise quantity for diversion to ethanol is also open since the government does not want a situation where mills may face problems in selling sugar and potentially end up in payment default to sugarcane farmers.
The Food Ministry is analysing the pros and cons of both options (for diversion to ethanol) so that a sufficient quantity of sugar is available for domestic consumption and also there is no cane arrears issue develops, a top official in the Ministry said.
For pricing policy
The Government has to ensure that sugar mills do not produce ethanol from direct sugarcane juice/syrup in large volume so that there is no reduction in sugar production, an industry expert said, arguing for regulating the diversion through the ethanol pricing policy rather than putting any cap.
The Government in December last year had banned ethanol production from sugarcane juice and B-heavy molasses (BHM) with immediate effect and put a cap of 17 lakh tonnes (lt) for the diversion. However, later on the food ministry allowed the quantity of ethanol lying with mills, before the ban, to sell to oil marketing companies.
As the opening stock of sugar as on October 1, 2023, was 57 lt, with a 30 lt surplus from this year added to it, the closing stock in the 2023-24 sugar season (October-September) may be around 85 lt, which is considered much above the normal requirement. The current year’s sugar production (including diversion to ethanol) has been estimated at 340 lt, whereas the government believes in next season sugar output may be 325-330 lt.
Standalone refineries
If the Ministry decides to put a cap on diversion of sugar (in terms of sucrose) towards ethanol, it will consider the previous high of 41 lt diverted towards ethanol in 2022-23 season as well as the target to 20 per cent ethanol blending with petrol to be achieved in 2025, sources said.
Sugar mills having stand alone distillery produce ethanol from sugarcane juice/syrup or BHM or C-heavy molasses depending on ethanol purchase rates fixed by the oil marketing companies.