Maharashtra: Floods, drought spoil plans for ethanol production

By: |
Published: September 26, 2019 1:08:27 AM

The government has declared a rate of Rs 59 per litre for converting sugar to ethanol and the cost of production comes up to Rs 64 per litre which means a loss of Rs 5 per litre, which is not viable, he added.

The carry forward stock and the lesser production is likely to impact the supply of ethanolThe carry forward stock and the lesser production is likely to impact the supply of ethanol

The recent floods and severe drought in some parts of Maharashtra seem to have played spoilsport with the plans of sugar millers in the state to convert sugar to ethanol.

The Maharashtra State Cooperative Sugar Factories Federation had recently sought permission from the Centre to convert existing sugar stocks into ethanol , an additional alternate besides “C” Heavy Molasses, “B” Heavy Molasses and juice into Ethanol.

Jayprakash Dandegaonkar, chairman of the federation, pointed out that although the proposal has been accepted in-principle, there is a major difference in the rates declared by the government and the cost of production for conversion of sugar stocks to ethanol, he said.

The government has declared a rate of Rs 59 per litre for converting sugar to ethanol and the cost of production comes up to Rs 64 per litre which means a loss of Rs 5 per litre, which is not viable, he added.

Oil marketing companies have invited expression of interest to purchase around 511 crore litres of anhydrous denatured ethanol from sugar mills during 2019-20 (December-November) for blending with petrol. Maharashtra usually supplies around 110 crore litres.

Moreover, given the financial distress of sugar factories in last four seasons, although several factories have put in plans for expansion and modernisation,many of the factories have NPAs because of which banks are not willing to lend. Now, with the interest burden being imposed by factories on FRP payments, very few factories will be able to make investments. Last year, Maharashtra received orders for bids worth Rs 42.06 crore litres, of which the state could fulfill orders worth Rs 37 crore litres, senior officials said.

This season, oil marketing companies have sought bids worth 5,110 crore litres, of which Maharashtra’s share comes to 72.45 crore litres. The state bids for another 39.50 crore litres in Goa, Karnataka, Andhra Pradesh, Gujarat and Madhya Pradesh, which comes to a total of some 73 crore litres, of which the state could manage to supply around 58 crore litres, he said.

Moreover, given the recent floods that hit Satara, Sangli and Kolhapur, the major sugarcane growing belts in the state and the drought in Marathwada region, the total sugar production is expected to come down, he said.

Therefore the carry forward stock and the lesser production is likely to impact the supply of ethanol, the official said.

Oil marketing companies have also been asked to pay “realistic” transportation charges to the sugar mills, a sore point with the co-operatives in Maharashtra. Millers are seeking parity in cost of production and rates declared by the government and also a subsidy of Rs 10 per litre to enable more mills to participate in the ethanol programme.

“The cane available for crushing in sugar season 2019-20 as projected by the Sugar Commissioner shall drastically reduce to 470 lakh tonne, a steep fall of about 40%.

“This is mainly because of reduced acreage in 2018-19 (which comes for crushing in 2019-20) severe drought conditions then leading to reduced storage water availability in dams and finally below average rainfall till the present in the ongoing monsoon leading a consecutive drought in the second year,” he said.

Huge quantity of cane is getting diverted to fodder purpose and that apart from cane productivity of the available cane for crushing is expected to steeply reduce to about 70 to 75 lakh tonnes, he added.

Resultantly, the availability of molasses will be severely impacted creating huge problems in Ethanol supplies during 2019-20. It is estimated that even if a compulsion is made to switch to 100% “B” Heavy Molasses and Juice Options the availability of molasses will still be limited to 34.20 lakh tonnes only as against 44.60 lakh tonnes last year leading to a shortfall of around 10.40 lakh tonnes ( 23%), Dandegaonkar explained. “However, everyone shall not resort to “B” Heavy Molasses therefore the shortfall may further increase to 16 lakh tonnes ( 36%).. After factoring diversion for cattle feed and the requirements of Potable liquor, Pharma and chemical industries , the availability of ethanol will get restricted to 70 crore litres, 5 crore litres totaling 75 crore litres through the “B” Heavy Molasses and Juice routes separately. In case mills opt for “C” Molasses route , the Ethanol supply shall further reduce,” he cautioned.

Dandegaonkar pointed out that Oil Companies are expecting a supply of 110 crore litres from Maharashtra to meet the E-10 Mandate for states covering Maharashtra, Madhya Pradesh, Goa, Telangana, Tamil Nadu and Gujarat. “Thus there will be a net shortage of 35-40 lakh litres of Ethanol or even more. While Maharashtra shall be short of 16 lakh tonnes Conversion to Ethanol will result in utilization of 7 lakh tonnes of existing sugar stocks to achieve 42 crore litres of ethanol which means liquidation of inventory and generation of cash flows.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Crude relief for India: Two key reasons why global oil prices are falling
2Crude oil prices drops to lowest since Aramco attacks after Donald Trump scolds China
3Modi govt to boost onion supply as prices soar ahead of crucial state polls next month