With the Cabinet Committee on Economic Affairs giving its approval to fix the ex-mill price of ethanol derived out of B heavy molasses to Rs 52.43 per litre from prevailing price of Rs 47.13 per litre, millers in Uttar Pradesh, the country’s largest sugar and ethanol producer, appear to be very keen about switching to the new mode in the near future.
With the Cabinet Committee on Economic Affairs giving its approval to fix the ex-mill price of ethanol derived out of B heavy molasses to Rs 52.43 per litre from prevailing price of Rs 47.13 per litre, millers in Uttar Pradesh, the country’s largest sugar and ethanol producer, appear to be very keen about switching to the new mode in the near future. Terming this as “one of the best steps taken by the government to achieve the dual objective of encouraging more production of ethanol as well as of reducing some of the surplus sugar”, the Director General of Indian Sugar Millers Association said that this price will compensate for the loss in revenue from the sugar sacrificed.
“The sugar mills will be incentivised to divert surplus ‘B’ heavy molasses, which is in abundance, for ethanol production,” he said, adding that the current constraints on capacities to produce more ethanol will also have to be overcome by investing in ethanol projects over the next 2-3 years.
“The price announced by the government today is commercially neutral for millers to produce either sugar or ethanol. And with sugar stocks in the country burgeoning, it would be wiser to divert to ethanol, where cash flows would be faster too.“This would definitely get the millers interested,” he said.
Though it is too early for anyone in the industry to guess as to how much sugar production will come down due to this policy change, a more realistic estimate is that 7-8 lakh tonne sugar will be diverted in the country in the next 2-3 years. Talking to FE on condition of anonymity, a miller praised the Centre’s policy as a “step in the right direction” and one which will cover the costing of sugar as far as FRP is concerned.
However, some millers in Uttar Pradesh are worried mainly because of the state government’s decision to impose 12% reservation on B heavy molasses too. “We are travelling towards the ‘Brazil model’, which is a time-tested model,” said another miller, adding that farmers can continue to grow cane and still be benefitted and cane can be utilised either for sugar or ethanol.
Already, over 150 applications have been submitted to the government by sugar companies to avail the central government policy in which it will extend subsidised loans to sugar companies to build additional capacities for ethanol over the next 2-3 years. “This will help the country to achieve 10-15% ethanol blending with petrol probably even before the target for 2022,” said Verma.