Sugar mills eye molasses export, higher ethanol for blending in glut season

Factories seek to improve cash flows; Maharashtra allows export of molasses

Against the backdrop of a bumper sugarcane harvest and an estimated sugar output of 30.5 million tonnes (mt) in the next crushing season, mills are looking to tap export of molasses to improve cash flow and provide additional stability to the sugar sector amid demand-supply volatility.

Molasses is a cane by-product generated during sugar production. Its recovery is pegged at 4.75 per cent of cane crushed. It is processed to make ethyl alcohol and methyl alcohol. 

While ethyl alcohol is unfit for human consumption, methyl alcohol is used for making liquor by distilleries, besides other pharmaceutical uses. Molasses is also processed to make ethanol, which is mixed with fuel under the central policy.

Molasses is in high demand in several countries, including South Korea, Vietnam, Europe, and 

West Asia for different industrial applications, including cattle feed and inflammable products.

Since molasses is a state subject, respective governments enjoy jurisdiction on its interstate and international movement.

Conceding to the demand of the industry, the Maharashtra government on Monday allowed molasses export to other states and countries.

“There was a ban on the export of molasses from Maharashtra till September 30. The state has issued a government order, allowing its export,” National Federation of Cooperative Sugar Factories Managing Director Prakash Naiknavare told Business Standard.

 

 

“In the current season, nearly 300,000 tonnes of molasses have been exported from Uttar Pradesh (UP), Punjab, Karnataka, and Haryana. With Maharashtra getting on the bandwagon, the state can also contribute to 250,000 tonnes of exports in the coming months,” All India Sugar Trade Association Vice-Chairman Rahil Shaikh informed, adding international prices are now at $120 per tonne.

In the wake of expected glut in molasses next year, the Indian Sugar Mills Association (ISMA) had recently urged the Centre to facilitate export of C-heavy molasses in the 2020-21 sugar season (October-September) or till surplus sugarcane is produced. The exports could occur without any financial burden on the government and yet allow the use of more B-molasses and cane juice for ethanol, instead of for sugar production, it suggested.

An executive with a leading UP-based sugar and ethanol producer said free movement of molasses would directly translate into more cash flow for mills. “Since molasses is highly demand-supply sensitive, free movement of the commodity makes commercial sense in the present context, more so when we are staring at another excess season of sugar output due to higher acreage and yield estimates.”

In UP — the country’s top sugar and ethanol producer - the controlled prices of molasses is about Rs 120 per quintal (100 kilos), which is 50 per cent higher, compared to Rs 80 per quintal last year, UP Sugar Mills Association Secretary Deepak Guptara said.

In the current sugar season, the molasses production in UP stood at more than 5 mt.

Meanwhile, ISMA on Monday said ethanol supply contracts for 1,700 million litres (ml) have been entered into between ethanol manufacturers/mills and oil-marketing companies (OMCs) for the current ethanol supply year (December-November) 2019-20.

Against this, 925 ml has already been supplied to OMCs between December 2019 and June 22, 2020, achieving an average all-India blending of over 5 per cent.

In 2018-19, 1,900 ml of ethanol was supplied. Due to drought in Maharashtra and Karnataka and other southern states, cane production had dropped steeply in the current season, which pulled down both sugar production and availability of molasses. Consequently, ethanol offers also dipped and contracts for supplies of ethanol decreased to about 1,700 ml in the current cycle.

Considering that ethanol production capacity in the country has increased to over 3,750-4,000 ml, the Centre is targeting ethanol production and supply target of 3,000-3,500 ml in 2020-21, and achieve 7.5-8 per cent ethanol blending with petrol.

As laid down in the National Biofuels Policy, 2018, the central government intended to achieve ethanol blending of 10 per cent and 20 per cent by 2022 and 2030, respectively.

In this context, ISMA has asked for further easing of rules governing and regulating supply and transport of ethanol between the states, apart from facilitating time-bound bank credit for ethanol projects being set up by sugar mills for optimum utilisation of the sugarcane value chain, comprising molasses and ethanol.