Govt mulls raising ethanol prices to curb sugar output


Cogencis, Monday, Aug 19

By Preeti Bhagat

NEW DELHI - The oil ministry may soon seek an approval from the Cabinet to slightly increase the price offered by oil marketing companies to sugar mills that make ethanol from B-heavy molasses and from 100% cane juice, for 2019-20 (Dec-Nov), three sources close to the development said.

"The increase in ethanol price by the government is likely to be very less this time because fair and remunerative price of sugarcane has been kept unchanged," an official said.

Oversupply Of Sugar And Depressed Prices Have crippled Mills' Ability To Pay Outstanding Dues To Cane Farmers And Ethanol Seems The Only Way Out

Speculations are rife that the government may raise the price of ethanol derived from 100% cane juice by 50 paise and from that of B-heavy molasses by 1.0-1.5 rupees (a ltr).

For 2018-19, the government had fixed the price of ethanol derived from high-yielding B-heavy molasses at 52.43 rupees per ltr and 59.13 rupees for ethanol made directly from 100% cane juice. Price of ethanol derived from C-heavy molasses is 43.46 rupees per ltr currently.

Despite an unchanged fair and remunerative price of sugarcane for next season, the government is mulling over a hike in ethanol prices to reduce the glut in the domestic market. Carryover stocks of sugar for 2019-20 (Oct-Sep) is estimated at an all-time high of 14.5 mln tn, Indian Sugar Mills Association said.

Production of sugar for the next season is seen at 28.2 mln tn, about 14% lower than the 32.9 mln tn estimated for the ongoing season, but it is higher than the annual consumption of 25.5-26.0 mln tn.

Oversupply of sugar and depressed prices have crippled mills' ability to pay outstanding dues to cane farmers and ethanol seems the only way out. 

Union Minister Nitin Gadkari has also told sugar producers that the industry will be in a further crisis if it continued producing sugar instead of shifting to ethanol.

In 2018-19, sugar companies supplied about 295 mln ltr of ethanol derived from cane juice and B-heavy molasses to oil marketing companies. By diverting sugarcane juice, B-heavy molasses and C-heavy molasses towards ethanol, production of sugar could be reduced by 50,000 tn.

To encourage sugar mills to produce ethanol, the government last year introduced differential pricing and provided soft loans to build new distilleries and expand existing ones.

India's annual ethanol production capacity is expected to grow to 6-7 bln ltr in the next two-three years, from 3.55 bln ltr at present. This will allow India to achieve over 15% ethanol blending with petrol.

The government's bio-fuel policy aims at achieving 10% ethanol blending with petrol by 2022, and 20% by 2030.  End

Edited by Akul Nishant Akhoury

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