Companies that are investing in the distillery business include DCM Shriram, Balrampur Chini, Dhampur Sugar, Dalmia Bharat and Rana group.
In a move that will help both sugar millers and over 45 lakh farmers in Uttar Pradesh, 16 new distilleries are being set up or expanded in the state at a cost of Rs 1,250.44 crore.
The move to expand the distillery business comes at a time when the Centre is pushing for higher ethanol blending to help keep the sugar inventory under control.
According to officials of the sugar and cane department, DCM Shriram group, which has a combined installed capacity of 33,000 TCD (tonnes crushed daily), is expanding its three distilleries. While the unit in Daurala is being expanded from 150 KLPD to 215 KLPD with an investment of Rs 27.14 crore, the unit at Lakhimpur Kheri is being expanded from 200 KLPD to 250 KLPD with an investment of `55 crore. The third unit in Hardoi is undergoing expansion from 150 KLPD to 250 KLPD with an investment of Rs 96.5 crore.
Balrampur Chini, the second-largest integrated sugar manufacturing company in the country — which has 10 sugar mills in Uttar Pradesh with a combined capacity of 76,500 TCD of sugarcane — is installing a new 320 KLPD distillery facility that is scheduled to start operations in December 2022, with an investment of Rs 195.13 cr.
DSM Sugar, a unit of Dhampur Sugar mills, is also on an expansion spree. While its unit in Dhampur is being expanded from 150 KLPD to 250 KLPD with an investment of Rs 96.5 crore investment, the group is investing Rs 145.15 crore to set up a new distillery of 200 KLPD in Dhampur.
Dalmia Bharat group is doubling the capacity of its 60 KLPD unit in Nigohi, putting in Rs 27 crore. Its other unit in Jawaharpur is being expanded from 120 KLPD to 200 KLPD with a Rs 46-crore investment.
Dewan Sugars is putting up a new distillery of 120 KLPD capacity with an investment of Rs 107.1 crore, while Sir Shadilal Enterprises is expanding its unit in Shamli from 70 KLPD to 130 KLPD with a Rs 60-crore investment.
Apart from these, Rana group’s Superior Biofuels is setting up a new distillery of 150 KLPD at Shamli with an investment of Rs 60 crore, while Karimganj Biofuels is investing Rs 60 crore to set up a 150 KLPD distillery with at Rampur.
As more and more sugar mills have started giving preference to manufacturing ethanol instead of producing sugar, the country’s sugar production is set to decline, thereby averting a glut.
According to credit rating agency Icra, high sugar exports for the second sugar season in a row, coupled with increased supply of ethanol for blending with petrol, will improve the operating profitability of integrated sugar mills by 75-100 basis points to 13-14% this fiscal.
“Sugar closing stocks are expected to decline to their lowest levels in the past four SSs to 9-9.5 million tonne in SS 2020-21, resulting in lower working capital borrowings. The improvement in profitability and controlled debt levels will, in turn, bolster the credit profiles of integrated mills this fiscal,” it said.
Stating that sugar mills have received interest benefits over the past two fiscals for investing in distillery capacity, it added that rising revenue contribution from ethanol through B-heavy molasses and sugarcane juice —which are more profitable than the traditional one using C-heavy molasses — will sweeten profitability of the distillery business of integrated players.