In a bid to help the sugar industry cut the cost for producing ethanol, the government is planning to allow ethanol production directly from sugarcane juice, instead of costlier molasses route. This may also help farmers cope with falling prices following record output.

Plans are afoot to render incentives to the sugar mills for deploying the technology for extraction of ethanol directly from sugarcane juice.

The government is also examining ways to provide a little more fiscal support to the industry with a condition that mills would clear dues to the farmers, agriculture minister Sharad Pawar said on Wednesday. In response to the government?s announcement, sugar scrips in the domestic capital market rose 6% to15.5 % following Pawar?s comments. Shares of Simbhaoli Sugar rose over 15% to Rs 39.55, Triveni Sugar rose close to 12% to Rs 123.50 after touching Rs 125.85, its 52-week high.

India?s biggest sugar producer Bajaj Hindusthan rose over 6% to Rs 155.90 in the Mumbai market after the announcement.

When asked if excise duty exemption was being explored, the minister said a group of ministers (GoM) has taken a few decisions and he would soon seek a Cabinet approval. ?The GoM headed by external affairs minister Pranab Mukherjee has recently recommended that the sugar mills can deploy the technology for extracting ethanol directly from sugarcane juice. The proposal would be sent to the Union Cabinet for approval,? Pawar said in the sidelines of 5 th Global Knowledge Millennium Summit hosted by Assocham here on Wednesday.

He said the GoM also resolved to extend monetary incentives to sugar mills in this programme and the mandatory doping of auto-fuel with ethanol would be increased to 10% by October 2008. At present, the mandatory doping norm is 5%. ?We will see that the monetary incentives to the mills will be on the condition that they clear the payments to cane growers,? he said.

However, according to some experts, the sugar mills have the capacity to produce ethanol from molasses for meeting the needs of 5% mandatory blending of auto-fuels as well for the requirements of the breweries and distilleries. If additional 5% blending norm is introduced and the mill source ethanol directly from sugarcane juice, it would cause a dip in sugar output by more than one to 2 million tonne.

On wheat, Pawar said the government would go slow in floating fresh tenders for further import.