Indian Sugar Industry Bets Big on Ethanol in 2020-2021

At the start of the 2020-21 sugarcane crushing season, the sugar industry in the country appears to be upbeat about production of ethanol. Abinash Verma, director general of Indian Sugar Mills Association (ISMA) — the oldest industrial association in India, the apex body of private sugar millers in the country — said they have predicted a dip of 15 lakh tonnes of sugar for production of ethanol. Majority of the fuel additive is going to be manufactured from B heavy molasses besides cane juice or sugar syrup.

Since the last two years, the central government has been prompting sugar mills to diversify their operations from sugar to ethanol. Higher prices for ethanol made from sugar syrup or cane juice and from B heavy ethanol were announced as well as an interest subvention scheme for mills that desire to expand or install new distilleries. The Centre has put an ambitious target of 10 per cent blending of ethanol by 2022 and the incentives to sugar mills may act as means to achieve it. Also, by reducing sugar production, the central government hopes to help mills clear their payment on time. Industry sources told The Indian Express that they expect a dip of about 20 lakh tonne in sugar production as mills are expected to divert cane for production of the fuel additive.

Ethanol is 99 per cent plus pure alcohol, which is used for blending with petrol. Sugar mills produce the fuel additive by fermenting molasses which they derive during the production of sugar from cane juice. B heavy molasses is the name given to the brown sticky syrup from which only a portion of the total recoverable sugar is extracted, which results in a dip in sugar production. Mills can recover higher sugar production figures if the whole sugar content of the juice is extracted leaving only C molasses, which can also be fermented to produce ethanol but to a lesser extent than B heavy molasses. Since the last two seasons, the Centre has been incentivising production of ethanol from B heavy molasses as well as sugarcane juice or sugar syrup.

Verma exuded confidence that this year the industry would be able to produce 300-325 crore litre of ethanol. “With states like Maharashtra and Karnataka reporting normal crop, we expect the ethanol production to be normal in the range of 300-325 crore litre,” he said. The Centre has extended the interest subvention scheme, which, Verma said, would help in extension and construction of distilleries.

The subvention scheme, which was first launched in September 2018, had seen 326 proposals being submitted by sugar mills. Only 60 projects were sanctioned and 36 projects had seen loans being disbursed. Sugar mills especially those in Maharashtra whose balance sheet are intrinsically weak have had difficulties in raising loans from banks. As a way out, the Union government has allowed the tripartite agreements among mills, oil marketing companies (OMCs) and banks for such projects. In the last two years, Verma said, the ethanol manufacturing capacity in the country has increased from 270-275 crore litre to present 425 crore litre at present.