Centre asks sugar mills to divert excess cane, sugar for ethanol production

Following the lockdown, the mills had to face the challenges of low ethanol takeoff by the OMCs in some states, including UP, due to the drastic crash in fuel sales
With surplus sugar production and falling market demand pulling down sugar prices and leading to an accumulation of farmers’ arrears, the Centre has asked sugar mills to divert the excess cane and sugar for the production of fuel grade ethanol.

In an advisory to the mills, the Union Ministry of Consumer Affairs, Food and Public Distribution underlined that surplus production was depressing the ex-mill price of sugar, thus adversely affecting sale realisation and cash flow, which contributed to the accumulation of cane arrears.

To improve the liquidity and clear farmers’ dues, the Centre had taken several measures in the 2017-18, 2018-19 and the current 2019-20 sugar seasons. These included assistance to mills to facilitate sugar export, extending buffer subsidy, extending assistance for defraying expenditure towards transport, freight, handling and other charges on export, extending soft loan to mills through banks, extending interest subvention to mills for augmentation of ethanol production capacity, etc.

To encourage mills to divert cane for ethanol production for blending in petrol, the government had allowed production of ethanol from B-heavy molasses, sugar juice, sugar syrup and sugar, and fixed “remunerative” ex-mill price of ethanol from C-heavy molasses @Rs 43.75 per litre; from B-heavy molasses @Rs 54.27 per litre and @Rs 59.48 per litre for ethanol derived from sugarcane juice/sugar/sugar syrup for ethanol season 2019-20 (Dec-Nov).

According to the advisory, in order to encourage mills to divert sugarcane to produce ethanol in the interest of farmers and sugar industry, soft loans of Rs 18,600 crore are being extended through banks to 362 projects, including 349 mills and 13 molasses-based standalone distilleries, for enhancement and augmentation of ethanol production capacity, for which an interest subvention of Rs 4,045 crore for 5 years is being borne by the government.

However, out of 349 mills, which had been granted in-principle approval by the Department of Food and Public Distribution, so far only 166 mills have submitted applications to banks.

Meanwhile, Indian Sugar Mills Association (ISMA) director general Abinash Verma told Business Standard the existing framework aimed at boosting ethanol production had failed to deliver the desired results. “The three stakeholders of mills, oil marketing companies (OMCs) and commercial banks should enter into a tripartite agreement for the optimum utilisation of the policies and incentives to increase ethanol production,” he said.

He claimed that ISMA had already mooted the idea to the concerned officials during the course of informal meetings before the lockdown was imposed in March 2020.

The Centre is of the opinion that ethanol is the way forward for sugar sector and all mills should come forward to avail of loans for augmenting their ethanol production capacity, and thus divert excess sugarcane to fuel grade ethanol.

The union ministry lamented even the installed ethanol capacity has not been fully utilised. The advisory said the mills having distillation capacity should divert B-heavy molasses and sugar syrup for producing ethanol to utilise their capacity, while those mills, which do not have distillation capacity should tie-up with distilleries, which can produce ethanol from B-heavy molasses.

Following the lockdown, the mills had to face the challenges of low ethanol takeoff by the OMCs in some states, including UP, due to the drastic crash in fuel sales.

“Since the lockdown is now slowly being eased, we expect that the ethanol supply situation would gradually improve rather than worsen from here,” Verma observed.

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