Rectified spirit (RS) consumption is likely to decline 20 per cent this year on falling demand from the chemical industry, according to estimates made by industry officials.
RS is produced from molasses, a by-product of sugar, and finds applications in three main areas - chemical sector, fuel oil and potable alcohol. Sources in the industry said that the total usage of ethanol is expected to decline to 1,850 million tonnes this year from 2,200 million tonnes last year, which is in line with lower cane crushing estimates. Crop diversion to wheat, rice and other edible oilseeds has resulted in over 10-15 per cent fall in the acreage area. Moreover, the recovery has also declined in some areas where inorganic farming has led to a low sucrose content in matured crop.
Latest industry estimates show availability of 190 million tonnes of cane for crushing this year as compared to 260 million tonnes last year. The demand from the chemical sector, which consumes about 41 per cent of the total RS production, has halved to 450 million litres because of global economic slowdown as exports of end-products has declined sharply.
RS is widely used as intermediates for manufacturing various chemical acidic products such as acidic acid and other chemicals such as mono ethylene glycol (MEG), which is used to make fibre. Apparently, industrial use of rectified spirit, used to make Indian-made foreign liquor (IMFL) including whisky and rum, has also declined marginally to 900 million litres this year from 950 million litres last year.
But the mandatory 5 per cent blending of ethanol, the third largest end-product of RS, has increased consumption in the fuel oil sector to around 450 million litres from 400 million litres last year.
“The decline in the chemical industry’s demand can be attributed to falling crude oil prices as MEG production through crude oil has become cheaper than through RS. The export demand of different acidic products has also declined severely, and hence the demand for RS is unlikely to improve this year,” said an official with one of the largest ethanol suppliers in the country.
Crude oil is a substitute of rectified spirits for MEG manufacturing. Now, crude has declined to over one-fourth from the peak high of $147 a barrel in July last year. Therefore, chemical manufacturers are not lifting any rectified spirit now, said Deepak Desai of Ethanol Association.