Alcohol to get dearer on shortage of molasses

Driven by higher demand for ethanol for blending in petrol and production of potable liquor, price of molasses, a key raw material in its manufacture, is going up. This has lead to expectations that alcohol prices will rise by between 15-20 per cent this year.

Molasses prices have gone up in Uttar Pradesh and Maharashtra, key sugarcane growing states. In Uttar Pradesh, prices of molasses have risen 50 per cent, to Rs 300 per quintal since November 2007. In Maharashtra, molasses prices have gone up by 10 per cent.

The industry is gearing up for further price hike. All-India Distillers' Association president Devin Narang said: "This year, sugarcane production is expected to be lower, as compared with last year. This will push molasses prices upwards."

With an anticipated decline in sugar production next season (October-September), molasses production will slip further.

"Molasses production would have been around 13 million tonnes, had sugarcane production touched 30 million tonnes. However, with a projected decline in output to 26 million tonnes, molasses production will also come down to 11.5 million tonnes," said C B Patodia, president, Uttar Pradesh Sugar Mills' Association and advisor, Birla Group of Sugar Companies.

"Higher prices of molasses are likely to result in prices of alcohol going up by 15-20 per cent. The increase in packaging and bottling costs will also have an impact on prices," Raju Vaziranay, chief operating officer, Radico Khaitan said. He added that the proposed uniform excise on alcohol across all states will also increase liquor prices by 5-7 per cent.

Companies are trying to combat the impact of rising molasses prices by buying readymade spirits from the market to produce alcohol.

Khodays India Ltd director Giridhar Khoday said: "We prefer buying spirits directly from the market than purchasing molasses since they are cheaper. Spirits are available in plenty and give a better product."