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Maharashtra sugar millers seek long-term pacts with OMCs for ethanol

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Published: May 15, 2019 12:24:44 AM

Sugar millers in Maharashtra have sought the intervention of the Niti Aayog to ensure long term purchase agreements with Oil Marketing Companies (OMCs) on the lines of power purchase agreements with the cogeneration units set up by sugar factories.

Maharashtra sugar millers seek long-term pacts with OMCs for ethanolMaharashtra sugar millers seek long-term pacts with OMCs for ethanol

Sugar millers in Maharashtra have sought the intervention of the Niti Aayog to ensure long term purchase agreements with Oil Marketing Companies (OMCs) on the lines of power purchase agreements with the cogeneration units set up by sugar factories.

Sanjay Khatal, MD, Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), pointed out that since sugar mills would be making huge capital investments for the production of ethanol in view of the interest subvention subsidy, their interests have to be protected in case the prices of crude reduce. In the Cogeneration sector, sugar mills sign long term agreements for 13 years. “We are looking at long-term purchase agreements on the same lines for a period of 10-15 years at assured rates with a clause for price escalation when prices of cane become high,” he said.

For ensuring price stability, ethanol pricing should be de-linked from crude prices. Even if crude falls, ethanol price for blending should remain remunerative, Khatal explained. VK Saraswat, member, Niti Aayog said that the Aayog would look into it. He was speaking on the sidelines of the one-day meet on bio energy and market potential in Pune.

The price for ethanol produced from B-heavy molasses (also called as intermediary molasses) was hiked to `52.43 a litre but that for ethanol produced from C-heavy molasses was reduced marginally to `43.46 by the government.The price for ethanol made directly from sugarcane juice was fixed at `59 per litre. Diverting sugarcane juice for directly making ethanol, which can be doped in petrol, is common across the major sugar producing nations. Brazil tops the list where all the ethanol produced is directly made from sugarcane juice.

The ethanol procured by public sector OMCs has increased from 38 crore litres in ethanol supply year 2013-14 to estimated 140 crore litres in 2017-18. In the 2018-19 ethanol production season, which started from December 2018, an estimated 200-225 crore litres of ethanol is expected to be supplied by sugar factories to OMCs against a total requirement of up to 340 crore litres. One-fourth of the supplies are expected to be produced from B-heavy molasses while the rest would come from the conventional C-heavy molasses.

This season, surplus sugar production has been depressing sugar prices. Consequently, sugarcane farmers’ dues have increased due to the lower capability of the sugar industry to pay the farmers. In 2018-19 (December-November period) it is expected that the blending rate should touch 5% for the first time. India’s ethanol capacity is estimated at 300 crore litres. Of this, 130 crore litres is consumed by the potable alcohol sector and 60 crore litres by chemical industries leaving about 110 crore litres for blending with petrol.

To achieve the government’s target of 10% blending by 2022, the ethanol required is 300 crore litres. Sugar mills will have to make substantial investment for this. Thanks to the government’s subsidised loan scheme, as many as 114 mills are expanding their capacities, which should in the next 24 months add 90 crore litres of ethanol capacity. Capacity for another 100 crore litres needs to be created. After the government announced an interest subsidy on loans in June for adding capacity to produce ethanol, over 150 applications were made, according to market reports.

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