Maha mills begin ethanol delivery to OMCs for 2014-15 sugar season

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Pune | Updated: February 20, 2015 1:15:33 AM

After initial hurdles, sugar mills in Maharashtra have begun delivery of ethanol to oil marketing companies (OMCs), supplying almost 65% of the total demand put forth by the firms.

After initial hurdles, sugar mills in Maharashtra have begun delivery of ethanol to oil marketing companies (OMCs), supplying almost 65% of the total demand put forth by the firms.

According to RG Mane, general secretary, All India Ethanol Manufacturers Association, about 35 factories from Maharashtra have placed bids to supply around 21 crore litres of ethanol. Normally, mills from the state supply around 40% of the total demand placed by OMCs but this time the mills will supply around 65% of the demand. OMCs have floated tenders for 32 crore litres from Maharashtra. Last year, the state had supplied 7.5 crore litres of ethanol to OMCs.

Maharashtra has 68 ethanol manufacturing plants with a total production capacity of 72 crore litres. However, mainly due to lack of demand, this capacity has remained unutilised. This capacity is enough to meet the requirement of Maharashtra and neighbouring states if 5% to 10% doping of petrol with ethanol is allowed. Interestingly, falling sugar prices had prompted the state’s mills to seek permission for production of more ethanol.

In view of surplus production and high opening stock of about 7.5 million tonne, the industry body said new avenues should be explored to dispose of surplus sugar, such as conversion of cane juice into ethanol with government aid, including incentives and subsidies.

Some mills in the state have resorted to advance sale of sugar at distress prices. Maharashtra chief minister Devendra Fadnavis had demanded the subsidy be provided for at least 2.5 million tonne of raw sugar in 2014-15 so that the cash-starved sugar industry makes timely payments to farmers for cane purchases. Sugar prices have fallen below cane costs in Maharashtra and Uttar Pradesh, hurting the already-stressed sugar mills.

Sanjeev Babar, MD, Maharashtra State Cooperative Sugar Factories Federation ( MSCSFF), said the response to tenders has been good this year. However, no annoucements have been made on the raw sugar subsidy exports, something that the mills have been waiting for, he said.

Recently, the food ministry has suggested that only those sugar factories that supply ethanol to OMCs be eligible for availing of subsidy for raw sugar exports and this had been a cause for concern for mills in the state, Babar pointed out. Unless any notification is issued, the mills will not take steps to supply 100% of the total demand placed by the OMCs, he added.

Mills in Maharashtra have already been protesting against the bank gaurantee demanded by the OMCs and although this has been brought down to 7%, it is still a burden on mills who have to pay FRP payments to farmers, Babar said.

The three OMCs — Indian Oil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — had sought bids from ethanol manufacturers by January 12 to procure 97 crore litres of cane extract for mixing in petrol. Sugar millers have been asked to quote quantities they can offer, according to the tender document. The tender follows the Cabinet Committee on Economic Affairs’ decision on December 10 on fixing the delivered price of ethanol in the range of R48.50-49.50 per litre, depending on distance of the mill from depot/installation of the oil firm.

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