Mills and co-operatives having the capacity to produce ethanol will have to convert one-fourth of their alcohol production into the bio-fuel for blending with petrol in order to be eligible for availing the raw sugar export subsidy.
However, the rule isn’t applicable to mills that don’t have ethanol production capacity and they will continue to get subsidy for raw sugar production under the relevant government scheme. Currently, sugar mills are the biggest producers of ethanol, a by-product of cane.
Usually, sugar mills produce alcohol, or rectified spirits, after fermenting molasses from cane. The rectified spirit, which has 94.5% purity, also contains water and some impurities. Fuel ethanol is produced out of rectified spirit after removing water and purifying it further to achieve a minimum purity level of 99.6%. The latest move by the food ministry, which got the approval of the cabinet committee on economic affairs late last month, is aimed at nudging more mills and co-operatives that supply ethanol to supply the bio-fuel for blending with petrol.
The government late last year re-affirmed its commitment to ensuring 5% ethanol blending with petrol at the national level and some states, including Uttar Pradesh, can even raise the blending limit to 10%. The country could achieve only 2% ethanol blending limit in the last fiscal, even over a decade after the government first mooted the idea and endorsed it at various stages. Worse still, the ethanol blending limit achieved so far this fiscal has been a meagre 1.37%.
Last month, the CCEA also approved a food ministry proposal that the quantity of raw sugar export under the subsidy scheme be restricted to
1.4 million tonne for the current marketing year through September. It had also approved a subsidy of Rs 4,000 per tonne for raw sugar exports this year, although a notification is pending.
Last February, the CCEA had approved the subsidy proposal for two seasons through September 2015, aimed at helping mills cut a glut in refined sugar and improve cash flows so that they can repay dues to farmers as well.
Cane arrears at all-time high
Cane arrears hit a record Rs 14,500 crore until mid-February and are expected to rise further this marketing year, showed data compiled by the Indian Sugar Mills Association. “This is higher than even the peak arrears that were recorded in the last sugar season of Rs 13,000 crore at the end of March 2014,” ISMA said. Arrears have piled up this season as ex-factory sugar prices in Uttar Pradesh and Maharashtra have dropped even below the cane costs, thanks to plentiful supplies.
Sugar output rises 14% till Feb end
India’s sugar production rose nearly 14% to 19.40 million tonne until the end of February from a year before, according to data by Indian Sugar Mills Association.
Maharashtra produced about 7.4 million tonne until end-February this marketing year that started on October 1, compared with 5.75 million tonne a year before.
Uttar Pradesh produced 4.96 million tonne of sugar up to February 28, against 4.34 million tonne a year earlier. Karnataka produced 3.28 lakh tonne, up 6.1% from the corresponding period last year.