Blending to push ethanol output by 35 per cent to 4.5 billion litres

The target of 10 per cent blending in fossil fuel is likely to push domestic ethanol production by 35 per cent from 3.33 BL in the 2020-21 sugar season (SS) to 4.5 BL in the 2021-22 cycle. Assuming that most of the additional ethanol requirement is derived from sugarcane juice and BHM, it will translate into the diversion of an additional 1.3 MT of sugar in 2021-22 compared to the 2020-21 season.

Blending to push ethanol output by 35 per cent to 4.5 billion litres

Lucknow

The target of 10 per cent blending in fossil fuel is likely to push domestic ethanol production by 35 per cent from 3.33 billion litres (BL) in the current 2020-21 sugar season (SS) to 4.5 BL in the 2021-22 cycle.

Assuming that most of the additional ethanol requirement is derived from sugarcane juice and B-heavy molasses (BHM), it will translate into the diversion of an additional 1.3 million tonnes (MT) of sugar in 2021-22 compared to the 2020-21 season.

“As such, it is estimated that the diversion of cane juice and BHM to ethanol will reduce sugar output by 3.4 MT in next season compared to 2.1 MT this year (a massive jump of more than 60 per cent),” the Indian Sugar Mills Association (ISMA) said on July 14.

However, a better picture of diversion will emerge once the oil marketing companies (OMCs) float tenders and bids are made by mills for ethanol supply sometime in October.

In the current season, till July 5, the total contracted quantity of ethanol stood at 3.33 BL, of which ethanol manufactured from cane juice and BHM is expected to be 2.3 BL, which roughly translates into the diversion of 2.1 MT of sugar into ethanol.

With higher ethanol production capacity and continued surplus sugarcane next year, a larger quantity of cane juice/syrup/BHM is expected to get diverted to ethanol.

According to ISMA, after accounting for a reduction in sugar output due to diversion to ethanol, the domestic sugar production in 2021-22 is pegged at 31 MT, which is nearly the same as projected for the current year. The sugar year runs from October to September.

The estimate has been made assuming normal rainfall and other optimum conditions during the remaining period. However, after considering the rainfall in July–September 2021, the water situation in the reservoirs and the second set of satellite images in Sep/Oct 2021 across India, ISMA will release its 1st advance estimates for the 2021-22 season in October 2021.

“By that time, the crop will be more mature and there will be clarity on the rainfall and water availability as well as (on) ethanol supply from cane juice/BHM,” ISMA added.

With an opening balance (OB) of about 10.7 MT as of Oct 1, 2020, the estimated sugar production for the current season of 30.9 MT, the expected domestic sales of 26 MT and exports of 7 MT during the season, the OB as on Oct 1, 2021, is estimated at 8.7 MT.

Based on satellite images procured last month, the total acreage under sugarcane in India is estimated at 5.4 million hectares (MH) in 2021-22, which is 3 per cent higher than the 2020-21 season’s acreage of 5.29 MH.

Uttar Pradesh is estimated to have a cane area of 2.3 MH, more or less similar to the previous year. ISMA is expecting a marginal increase in yield as well as sugar recovery and thus the estimated sugar production, without considering diversion for production of ethanol, is expected at 11.93 MT.

Maharashtra’s cane area has jumped 11 per cent from 1.15 MH in 2020-21 SS to 1.28 MH in 2021-22. During the current year, pre-monsoon rainfall has been good, which was followed by a good rainfall in June 2021. Also, reservoir levels in all the regions are reported to be above normal. As such, the estimated sugar output is pegged at 2.13 MT in 2021-22 without diversion to ethanol.

The sugarcane area in Karnataka is slightly higher in 2021-22 at 522,000 hectares vis-à-vis 501,000 hectares in 2020-21. The sugar production is estimated at 4.88 MT without considering the diversion of sugar to ethanol.

The remaining states are expected to collectively account for nearly 5.5 MT of sugar in the 2021-22 SS without diversion to ethanol.

Meanwhile, in the current 2020-21 season, 30.7 MT of sugar has so far been produced and another 200,000 tonnes is expected to be produced in the special season till September 2021 in Tamil Nadu and Karnataka, pushing domestic output to 30.9 MT.

(Virendra Singh Rawat is a Lucknow-based financial and economic journalist.)