Elections to ethanol blending: Sugar production drop weighs on stakeholders

The government reportedly considering a blanket ban on exports to cool down prices

The more than 9 per cent drop in sugar production in  in the 2022-23 season, which started in October, resulting in ex-mill prices increasing, has varied implications: From electoral politics to the ethanol-blending programme.
 

Sugar being a sensitive commodity, a prolonged spike in its prices during state elections in North India or Lok Sabha polls in 2024 will be a political tool for the Opposition.
 

Ex-mill sugar prices in some places have increased by Rs 100-200 per quintal in the past month and a half due to a sudden spike in demand amid a slowdown in supplies. The government has responded by first allowing mills to sell an extra 200,000 tonnes in April, followed by a similar rise in permissible quotas for May 2023 as well.
 

Media reports a few days ago said the government was considering a blanket ban on export, which has been capped at 6 million tonnes in the 2022-23 sugar season. Of this till some time ago, around 5.8 million tonnes had been shipped out. In the previous marketing year (2021-22), India exported around 11 million tonnes, a record.

Ethanol question
 

If sugar production is going down due to lower than expected crushing in Maharashtra and a drop in the average recovery rate, what does it mean for the ethanol programme?
 

Around 4 million tonnes will go into ethanol manufacture in 2022-23 as against 4.5 million tonnes in 2021-22, according to a recent report by the Indian Sugar Mills Association (ISMA).
 

Several industry experts doubt this. Their view is that in 2022-23 around 4.5 million tonnes of sugar will be diverted for ethanol, 5 million tonnes in 2023-24, and 6 million tonnes in 2025-26.
 

According to industry sources, the capacity is good enough to have 12 per cent ethanol blending with petrol during Ethanol Supply Year 2022-23 (December to November).
 

By December 2023, the capacity will rise by 12.5 billion litres, which will be good enough to produce 7 billion litres of ethanol.  By December 2024, the ethanol production capacity is expected to increase to about 14.50 billion litres to meet the supply of about 9.8 billion litres during ESY 2024-25.
 

The share of grain-based ethanol is now low in comparison to the sugarcane-based one but by 2025 it is expected to be on a par.

“Sugarcane crushing hasn’t gone down but the recovery of sugar from sugarcane has. Therefore, when you first crush a cane, 4-5 per cent of that is molasses, which has remained intact hence there won’t be disruption in supplies. But in later stages when recovery is calculated, that has come down, which is why sugar production has been affected,” Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories (NFCSF), told Business Standard.
 

He said there might be a problem if, lured by high sugar prices, millers diverted more cane juice for making sugar rather than ethanol.
 

Other than that (a price allurement), most players say any shortfall in sugar production won’t by any stretch of the imagination affect the ethanol-blending plan.