Setback to sugar mills as UP hikes molasses quota for country liquor to 18%

Sugar millers claim quota hit their revenues, delayed payment to cane farmers

Upsetting private sugar mills in Uttar Pradesh just ahead of the next crushing season, the Yogi Adityanath government has hiked the reserved quota of molasses for country liquor makers to 18 per cent from the existing 16 per cent.

Since, the previous hike in the reserved quota was effected from 12.5 per cent to 16 per cent in early September 2019, therefore the quota ratio has clocked a massive uptick of nearly 45 per cent in  nearly eight weeks from 12.5 per cent to 18 per cent.

The decision, taken by the Adityanath cabinet here last night, is aimed at maintaining adequate supply of molasses for the manufacture of country liquor, which is consumed by the lower strata of society. The state government wants to ensure supply of good quality of liquor in order to stem the smuggling of hooch from neighbouring states.

Interestingly, private millers have long been demanding the abolition of quota, since it not only impacts their cash flow but also squeezes the free availability of molasses for ethanol production and subsequent mixing in fuel.

Molasses is a cane byproduct generated during sugar production. Its recovery is pegged at about 4.75 per cent of the cane crushed. Molasses is processed to make ethyl alcohol and methyl alcohol. While ethyl alcohol isn't for human consumption, methyl alcohol is used for making liquor and has medicinal uses as well.

Earlier, UP Sugar Mills Association (UPSMA) secretary general Deepak Guptara had written to the government, voicing concerns on the quota system, claiming molasses was a vital byproduct of the sugar value chain and its revenue went towards settlement of farmers’ arrears.

In September 2019, the quota was fixed in the backdrop of a shortfall in 2018-19 molasses production from estimated 5.5 million tonnes (MT) to about 4.7 MT, UP sugarcane commissioner Sanjay Bhoosreddy had told Business Standard.

The state government, which is targetting more than Rs 31,000 crore of excise revenue this fiscal, said almost half the purse accrued from country liquor.

The state has projected molasses production of 5 MT in 2019-20, of which the requirement of distilleries is pegged at 0.94 MT, as such the government has fixed the release of molasses in the ratio of 1:4.56 for reserved and unreserved category per month.

While 2018-19 molasses production in UP stood at 4.8 MT, together with the molasses’ opening balance of 0.94 MT, the net availability of molasses was 5.7 MT. Out of this stock, molasses availability for country liquor was 0.78 MT, while till July 31, 2019, nearly 0.29 MT of molasses reserved for country liquor was un-lifted.

Guptara lamented that during 2018-19, mills sold molasses at an average price of Rs 40 a quintal (100 kg) to distilleries. This rose to Rs 75 per quintal after the recent hike in prices, even as the price of molasses in the market was ruling around Rs 550 a quintal.

“This translates into a Rs 350-crore subsidy provided by the sugar industry to country liquor manufacturers. Till July 31, 2019, around 0.29 MT of molasses is lying un-lifted with mills from the reserved category,” the UPSMA letter stated.