The Indian Sugar Manufacturing Association (ISMA) has cautioned that the “discriminatory attitude and restrictive policies” of oil marketing companies (OMCs) can cost the country its ambitious target of blending 20% ethanol by 2025.
Alleging that OMCs are selectively signing long-term bipartite and tripartite agreements for purchase of ethanol for 10 years, ISMA urged the government to review the OMC’s policies that are restricting entry and investment in ethanol production.
In a recent letter to the Union food secretary, ISMA DG Abinash Verma said Uttar Pradesh, Maharashtra and Karnataka together produce 70% of the sugarcane in the country and around 75% of the total ethanol. Despite this, the OMCs have not given them due importance while inviting expressions of interest for agreements from project proponents setting up new ethanol plants in August last year.
“The OMCs did not give any allocation for capacity creation for Uttar Pradesh, and gave minimal allocation for Maharashtra and Karnataka. Out of 648.5 crore litres of state-wise allocation for capacity creation across the country, only 4% was allocated to these three states,” the letter said.
Another disappointment for the sugar industry was that OMCs had allocated only 10 marks to ethanol produced from sugarcane and molasses against 20 marks for ethanol produced from maize and 15 marks for those declaring they would use both maize and rice. “This is a clear discouragement for ethanol produced from sugarcane and molasses,” the letter said.
Furthermore, a clause of the ethanol procurement tender floated in 2021-22 prescribes that if ethanol plants that have signed bipartite or tripartite agreements with OMCs bid to supply for a particular depot, they would be given preference over existing suppliers. “This clause is unfair and violative of contractual agreement,” the letter said. On the one hand, existing distilleries have not been given the opportunity to sign such agreements, and on the other, they have been put on a lower priority, it said.
The letter suggested that to avoid disparity between producers of ethanol from sugarcane/ molasses and those of grain-based ethanol, and between existing and new ethanol producers, bipartite/ tripartite agreements for 10 years’ purchase of ethanol should be signed with all manufacturers.
According to a paper prepared by Niti Aayog, released by the Prime Minister in June last year, 760 crore litres of ethanol capacity will be required from the sugar industry using cane and molasses. The current capacity of the sugar industry is around 460 crore litres.
“There is a need to invest in sugarcane/ molasses-based distilleries in the next two years to create the additional annual capacity of 300 crore litres. Since most of the sugarcane is grown in UP, Maharashtra and Karnataka, it is but obvious that out of the 300 crore litres, most of the capacities will be created in these three states. But the OMCs have decided that they do not want any more ethanol production capacities in these states. We therefore, feel that the EoI floated by the OMCs for capacity creation is not in line with the planning of the central government and the suggestions made by the Niti Aayog,” the ISMA letter said.