Sugar bodies seek review of plan for ethanol from sugarcane juice; move may delay cane price payment to farmers: ISMA

A day after the Centre stopped the production of ethanol from sugarcane juice, the sugar industry came out in the open against the move, even as the government assured that the decision would be reviewed periodically.

The National Federation of Cooperative Sugar Factories Limited President Jaiprakash Dandegaonkar urged the Centre to reconsider its decision to stop the use of sugarcane juice and sugar syrup for ethanol production. Dandegaonkar, meanwhile, said that because of this decision, India may not be able to achieve the 20 per cent ethanol blending target by 2025.

Meanwhile, the Indian Sugar Mills Association (ISMA) stated in a statement that because of this pause, the crushing capacity of sugar mills will come down drastically, leading to a delay in the crushing season resulting in loss, not only to the mills but more importantly to the farmers.

The Centre on Thursday banned the use of 'sugarcane juice and sugar syrup' for ethanol production in the 2023-24 supply year, which started this month, to maintain adequate sugar availability for domestic consumption and to keep prices under check. However, it has allowed the use of 'B-molasses', a cane by-product, for ethanol production in 2023-24.

"The government should reconsider its decision or grant higher prices to ethanol and sugar. The country may not be able to achieve the target to blend 20 per cent of ethanol in petrol if this decision continues. This move will push the sugar industry into problems," Dandegaonkar said.

Sugar factories cannot survive on sugar production alone. Of the total ethanol produced in the country, 50 to 52 per cent is produced using sugarcane juice. So no other food grain can achieve this, he said.

Sabyasachi Majumdar, Senior Vice President of ICRA Limited, in a note said that the restriction will result in lower diversion towards ethanol, which may lead to the ethanol blending ratio falling below 10 per cent for Supply Year 2023-24, which was around 12 per cent in 2022-23. "Though the recent development is detrimental to the sugar industry as it limits the upside, however, the tight demand-supply situation is expected to keep the sugar prices firm and profit margins at a satisfactory level," Majumdar said.

ISMA, meanwhile, suggested some alternative plans to the Centre. It said that to maintain the continuity of ethanol supply for the Ethanol Blending Program, the government should allow the conversion of the remaining contracted or cancelled juice quantity to B-heavy molasses. “This will provide the oil marketing companies with additional ethanol without significantly affecting sugar production,” ISMA said.

It also sought permission for distilleries to continue processing existing juice stock to ethanol until December 10, with the produced ethanol to be supplied to the OMCs until December 20 to avoid abrupt disruptions and ensure a smooth transition.

Cooperative Sugar Factories also demanded a compensatory increase in pricing for ethanol derived from B and C heavy molasses, which would ensure sufficient cash flow for sugar mills to fulfill their financial obligations to farmers.