There was a time when India had the infamous sugar cycle, i.e., exporting cheap sugar during surplus production and importing costly sugar during the deficit season. This would place a burden on the exchequer, along with huge cane arrears. But with an innovative ethanol blending policy, this cycle has become a thing of the past. The cycle has smoothened out, with deft management of ethanol blending.

This scheme entails moving to a fixed price regime for ethanol feedstock, fixing the ethanol blending mandate, ensuring that oil marketing companies buy based on the mandate, ensuring timely payment of the quantity to be supplied, and providing interest subvention schemes to increase the production capacity of fuel ethanol.

Ethanol procurement/blending under EBP programme increased from 38 crore litres in ESY (ethanol supply year starting November) 2013-14 to 575 crore litres in ESY 2023-24 (till mid Sep). Ethanol blending percentage increased from 1.53 per cent in ESY 2013-14 to 13.6 per cent in ESY 2023-24 (till mid Sep).

The sugar industry has responded well, adopting better efficiencies both in sugarcane cultivation and processing, increasing farmers’ income and making timely sugarcane payment to farmers. Farmers’ dues have reduced to all-time low of under 4 per cent at the end of 2023-24. The industry initiative to increase ethanol capacity on the back of encouraging policies is also helping the economy save on crude oil imports to the extent of the blending percentage achieved. For about a decade till July 2024, India saved ₹99,014 crore in foreign exchange by substituting 17.3 million tonnes of crude, reducing carbon emissions. We shall achieve 20 per cent ethanol blending programme next year.

GST cut

Having enhanced the supply side for ethanol, we now must work on demand side. Flexi fuel cars are the solution. GST reduction is required to make flexi fuel cars competitive. We also need to enhance infrastructure for 20 per cent ethanol blending.

For now, the next big steps are to fix methodology to link sugarcane prices to sugar industry revenue. The government had adopted a system of declaring Minimum Selling Price (MSP) of sugar based on sugarcane prices. It was announced as ₹ 29/kg in June 2018 and then revised to ₹ 31/kg in February 2019. Since then, MSP continues to be the same. There is a need to revise the MSP to reflect real cost of production of sugar and increase in sugarcane price. Also, there is a need to announce ethanol prices for the current year and 2024-25 for B-molasses and sugarcane juice.

The Centre has supported the sugar and the allied agriculture sector by facilitating diversion to ethanol in a sustainable manner. The industry has helped in supporting sugar prices, increasing farmers income and at the same time reducing volatility in sugar availability. In the 2023-24 season, due to lower sugarcane production estimates, the government decided to temporarily restrict ethanol diversion from sugar.

Now the stocks are more than comfortable, hence the government has removed the restriction on ethanol for the 2024-25 season. This shows dynamic policy formulation. Further, it is important to shift to digitization of data. The Centre is focusing on this aspect. Ethanol policy must build on the momentum it has built over the years.

The writer is an expert in the sugar industry and member of many industry associations

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