UP government is investing Rs 100 crore to upgrade cooperative sugar mills to produce ethanol along with sugar.
Sugar mills in the top sugar producing states viz. Maharashtra and Uttar Pradesh are projected to account for 40 per cent and 30 per cent of the fresh ethanol capacity addition, according to Care Ratings deputy general manager (corporate rating) Gaurav Dixit.
While Maharashtra-based mills are likely to invest Rs 2,250 crore, UP mills would incur Rs 1,500 crore towards such capital expenditure, thus totalling Rs 3,750 crore for the two states. In UP, mills belonging to Triveni, Dhampur, Balrampur and Dwarikesh are collectively projected to install fresh ethanol production capacity of almost 1,200 kilo-litres per day, Dixit said.
Currently, 4-5 per cent of ethanol is mixed with petrol as against the federal target of 10 per cent blending with biofuel by 2022, which is lower than 25 per cent mandated ethanol mixing in Brazil. Even for 10 per cent blending, there is a requirement of 3.3 billion litres of ethanol, which indicates the enormous economic opportunities for Indian sugar mills.
Total ethanol supplied by mills to OMCs for blending in petrol grew from 380 million litres in 2013-14 to 1.11 billion litres in 2015-16, before dropping to 660 million litres the following year 2016-17. During 2017-18, the total ethanol supplies are pegged at 1.40 billion litres.
The Centre hopes to double ethanol doping to 8 per cent in the 2018-19 sugar season with petroleum minister Dharmendra Pradhan suggesting that the sugar industry also consider producing ethanol from other agro-residues, such as rice husk. The Centre incurs an expenditure of Rs 8-10 trillion of foreign exchange by importing crude oil and liquefied natural gas.
The sugar sector has been facing the vicious cycle of mounting arrears owing to glut, muted sugar realisation vis-à-vis cane prices, export market squeeze and working capital drought etc. Acknowledging the tight sugar scenario and negative outlook, in September 2018, the Centre had approved 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol to cut surplus sugar production and reduce oil imports.
The central government had received applications from nearly 200 sugar mills for installing ethanol capacity, of which 114 projects have already been approved, which would add nearly 25 per cent to the existing ethanol capacity.
Meanwhile, in UP, the Indian Oil Corporation is also setting up a greenfield ethanol plant in Gorakhpur, the pocket borough of UP chief minister Adityanath, with an investment of Rs 800 crore. The state government has also abolished dual taxation policy on the sale of ethanol-mixed petrol to promote ethanol doping. Earlier, a petrol retailer paid Value Added Tax (VAT) at the rate of Rs 14.41/litre while procuring petrol for distribution in UP. Later, if the company mixed ethanol, it was subjected to an additional VAT levy. This was hampering the ethanol chain in UP.
Additionally, the Adityanath government had last year cleared 6 bio-fuel investment proposals worth Rs 1,700 crore in Sitapur, Hapur, Meerut, Bareilly and Muzaffarnagar districts. The biggest plant would be set up by SunLight Fuels in Sitapur, costing Rs 1,550 crore, which would use bagasse, a sugarcane byproduct extracted during the sugar production process, to generate biofuel.
Besides, the Yogi Adityanath government is investing Rs 100 crore to upgrade 6-7 cooperative sugar mills to produce ethanol along with sugar. Going forward, all 24 state government controlled cooperative mills would be modernised to synergise between sugar and ethanol production as per the prevailing market conditions and demand, UP sugar industry and cane development minister Suresh Rana told Business Standard.
In the current sugarcane crushing season, the opening stock of 10.2 million tonnes (MT) of sugar added to the project fresh output of 32 MT pegs the total availability of sugar in India at 42.2 MT. The annual sugar consumption of roughly 26 MT along with 5 MT of exports, would leave an excess inventory of 11.2 MT, which would further put pressure on the sugar prices and amplify glut.
For maintaining the balance in the sugar sector, Care Ratings has suggested oil marketing companies (OMCs) to prioritise ethanol from 100 per cent sugarcane juice, B-heavy molasses/partial cane juice, heavy molasses and even damaged food grains in that order. The tender for ethanol procurement for the 2018-19 season has been opened by the OMCs and there has been a bid for 485 million litres of ethanol from B heavy molasses and 18.4 million litres from sugarcane juice, which would help diversion of sugar to ethanol.
Currently, USA is the world’s biggest producer and consumer of bioethanol, accounting for 57 per cent of global production in 2015, followed by South America at 28 per cent.