In a major relief for farmers and sugar industry facing glut, more cane will be utilised by the distilleries from the next season commencing from November.
The sugar industry is facing excess production of sugar due to bumper sugarcane crop in the last season and also this year. The excess sugar production has created inventory problems for the industry, leading to delay in payment to the farmers.
The Union government in its Atmanirbhar Package announced in May had announced special incentives for setting up ethanol distilleries. Taking advantage of the incentive, existing sugar mills have decided to increase the production capacity of the existing distilleries.
Encouraged by the Centre’s stance of persuading more and more sugar mills to divert sugarcane for producing ethanol in order to reduce the sugar glut in the domestic market, several sugar companies in Uttar Pradesh are keen to set up exclusive plants for the production of ethanol from cane juice and are looking ahead for some positive policy initiatives from the state government that would be beneficial for all the stakeholders. On the one hand, this will increase supply of ethanol from the state and, on the other, it will attract new investment.
According to officials of the Cane and Excise department, an exclusive policy for the production of ethanol from cane juice is in the pipeline and is expected to be finalised within a month.
The UP Sugar Mills Association representing the private sugar mills has communicated to the UP government that the industry, backed by the Centre’s incentives, is keen to make fresh investments in the ethanol sector and has sought certain assurances that would further encourage the industry to invest.
Among the assurances that the industry is seeking are that the cane juice produced by the unit would not be subject to any reservation, preferential allotment or pricing control.
The government has also been asked to give assurance that if a multi-unit sugar company opts for setting up a unit to manufacture ethanol directly from cane juice, the reservation of this particular unit would not be considered in the computation of total available molasses.
This assumes importance as UP follows a policy for reserving molasses for production of country liquor, which is currently at 17 percent of the total available molasses.
Furthermore, since that plant would not be a regular sugar mill going by the conventional definition, the millers have also urged that the traditional regulatory framework be suitably amended.
The optimism among the sugar industry towards ethanol stems from the fact that the Union Petroleum Ministry has recommended an increase in the procurement price of ethanol for the current 2020-21 fiscal. While the price of ethanol for the 2019-20 seasons had been fixed at Rs 59.48 per litre, up from Rs 59.19 per litre in 2018-19, it is now expected to be increased by another Rs 3 per litre for the coming season.
A positive policy encouragement would go a long way in reducing excessive sugar production and its resultant difficulties. A sugar glut usually leads to negative market sentiment, thereby hampering the mills’ ability to clear the cane arrears of the farmers.
The sugar industry in UP, having produced over 1.26 crore MT sugar in 2019-20, is facing a piquant situation, where its outstanding cane dues are above Rs 8,000 crore.
Taking advantage of the Central government’s assistance for setting up ethanol distilleries, some more captive distilleries are in various stages of commissioning, and they would further increase the ethanol supply from the state.
The ethanol production not only caters to the demands of UP, it also meets the requirements of neighbouring states.
Currently, UP has 54 distilleries, of which 44 are captive distilleries of sugar mills. The state had offered 105 crore litres of ethanol to OMCs (oil marketing companies) for the 2019-20 season, of which 63.73 crore litres has already been supplied.