Covid-19 lockdown impacts sugar mills as OMCs reduce ethanol offtake

With petrol and diesel demand falling, OMCs are already dealing with excess supply of the biofuel; ISMA writes to them to reallocate ethanol to deficient depots for fuel mixing

Domestic sugar mills are facing impediments in supplying ethanol to the oil marketing companies (OMC) for mixing in fuel, since the demand for petrol and diesel has come down drastically following coronavirus lockdown.

Due to the dip in demand for vehicular fuel, several OMC depots are witnessing slower petrol offtake with the result that the mills are unable to supply ethanol, a sugar by-product, owing to the paucity of storage and mixing space with such depots. In past few quarters sugar mills were investing in a big way as a measure of diversification of product base.

Since, the ethanol requisition was contracted for by the OMC targeting 10 per cent fuel mixing ratio, the reduction in fuel demand has impacted ethanol requirement too.

Now, the Indian Sugar Mills Association (ISMA) has asked the OMCs to reallocate ethanol to other depots, which have ready storage space or were already deficient in ethanol for fuel mixing.

“The federal mandate is for 10 per cent ethanol mixing pan India. There are depots in several states, including Madhya Pradesh, Jharkhand, Chhattisgarh, Rajasthan, Odisha, West Bengal, which either have zero or very little ethanol supply owing to short supply. Therefore, we have requested the OMCs to reallocate the ethanol, else our distilleries would have to close down since we also have limited ethanol storage spaces,” ISMA director general Abinash Verma told Business Standard today.

He claimed the OMCs have responded “positively and quickly” to identify depots where they are facing problems of storage capacities and depots which could take additional ethanol supplies, beyond the contract.

It is a matter of time by when the OMCs and the sugar companies would mutually agreed to reallocate the ethanol quantities, so that all the ethanol contracted for in the year is supplied, he added.

In 2018, the OMCs’ requirement of ethanol for blending with petrol stood at 3.136 billion litres (BL) and for the 2019 season, the same was estimated at 3.3 BL. Last month, the OMCs had floated a fresh tender for the procurement of 2.53 BL of ethanol for the remaining months of the 2019-20 season.

After initial problems, sugar mills’ sugar production and supply are coming back on track gradually. ISMA said the sugar dispatches had picked up in the last 4-5 days. During the initial days of lockdown, there was concern about the availability of lime, sulphur, bags, phosphoric acid etc, but these issues have now been addressed to.

Meanwhile, ISMA has released the latest sugar production statistics for the current 2019-20 crushing season. Till March 31, more than 23.27 million tonnes (MT) of sugar had been produced compared to 29.68 MT in the corresponding period last season, thus showing a downfall of 6.40 MT or 22 per cent.

This season, 457 mills had participated in the sugarcane crushing operations against 527 mills last year, a downfall of 70 units across India.

Till March 31, 271 mills have ceased crushing pan India leaving only 186 plants functional compared to 240 mills, which were operational in the corresponding period last season.