This continuance of government support through remunerative prices for ethanol is likely to support the profitability of the sugar industry.
The Cabinet Committee on Economic Affairs (CCEA)’s decision to revise the prices of ethanol for supply to OMCs will be positive for the sugar industry in terms of profitability as well reduction in the surplus sugar stock. CCEA has increased the basic price of ethanol produced from B-grade molasses by `1.84/ litre (or 3.5%) while largely maintaining the ethanol price produced from C-heavy molasses and direct sugarcane juice for the procurement season 2019-20 (starting December 2019).
The CCEA decision implies that the oil marketing companies will procure ethanol produced from C-grade molasses, B-grade molasses and sugarcane juice at `43.75/litre, `54.27/litre and `59.48/litre in 2019-20 as against `43.46/litre, `52.43/litre and `59.10/litre in 2018-19 respectively, for blending with petrol.
The price support aims at increasing the participation of the sugar mills in the Ethanol Blended Petrol Programme (EBP) by providing remunerative and stable prices to suppliers and reducing the dependence on crude oil imports. This continuance of government support through remunerative prices for ethanol is likely to support the profitability of the sugar industry.
In case of a sugar surplus scenario, the proposal to allow production of ethanol through B-grade molasses and sugarcane juice would support the sugar mills in producing ethanol from relatively higher sucrose content material. While the realisations from pure ethanol production is lower than those obtained from sugar and ethanol in conventional method, this measure would allow the possibility of a reduction in sugar surpluses in overproduction scenarios, thus indirectly supporting sugar prices,” said Sabyasachi Majumdar, senior vice-president & group head (Corporate Sector Ratings), ICRA.
According to Care Ratings note, the primary aim behind the move is to divert sugar towards production of ethanol so as to reduce the supply glut of sugar and to achieve the target of 10% blending of ethanol with petrol set for EBP. Also at the same time, the aim is to increase the revenues of sugar mills by diverting sugarcane towards production of ethanol.