Centre may hike cane-ethanol price by 3% for 2023-24 season, industry says

The government may increase the price of ethanol produced from sugarcane-based molasses for the 2023-24 season starting November 1 by up to 3 per cent.

This is in line with the trend followed since the last few years, trade and industry sources said.

Though there has been no official announcement, industry sources said it could happen before the start of the new season.

The 2022-23 ethanol supply year will end on October 31, a month ahead of the earlier schedule. This will align it with the sugar production season.

Sources said that for ethanol produced from ‘B-heavy’ molasses, the procurement price could be raised by Rs 1.15 a litre.

For the one produced from ‘C-heavy’ molasses, it could be raised by Rs 1.75 per litre. That produced from sugarcane juice, syrup or sugar, the price could be raised by Rs 2.25 per litre from what has been prevailing in the 2022-23 season that ends on October 31.

In the ongoing ethanol supply year, the procurement price of ethanol produced from B-heavy molasses is Rs 49.41 per litre, while that produced from C-heavy molasses has been fixed at Rs 60.73 per litre. The one produced from sugarcane juice, syrup and sugar is at Rs 65.61 per litre.

Uppal Shah, co-founder & chief executive officer (CEO), Agrimandi.live Research said that according to domestic sugar mills, to produce ethanol directly from sugarcane juice, there is a higher production cost plus sugar mills have to sacrifice on sugar.

Keeping this in mind, the government must increase ethanol prices by about 7 to 8 per cent, to give the sugar industry the extra incentive.

A few months back, the oil marketing companies (OMCs) had twice raised the procurement price of ethanol made from damaged food grain and maize.

In the last round, the price of such ethanol was raised by Rs 3.71 per litre, thus taking the total procurement price increase in the 2022-23 supply year to Rs 8.46 per litre. It was Rs 9.72 per litre for maize for the remaining part of the supply year. This final price includes the interim relief announced on August 7.

The additional incentive was announced after the supply of surplus Food Corporation of India (FCI) rice for ethanol blending was stopped. This threatened to jeopardise the total programme.

After the last hike taken on August 22, the procurement price for ethanol produced from damaged grains for OMCs in the 2022-23 season was Rs 64 per litre. This was against Rs 55.54 fixed at the start of the season. That from maize was Rs 66.07 per litre against Rs 56.34 at the start of the season.

Till early July 2023 (of the 2022-23 ethanol supply year that will end in October 2023), around 3.51 billion litres of ethanol had been supplied by sugarcane- and grains-based ones.

Around 2.85 billion litres, or roughly 82 per cent, of that supply was from sugarcane-based sources and 660 million litres, or 18 per cent, from grain-based ones.

India is poised to achieve nearly 12 per cent annual average all-India ethanol blending in 2022-23 season.

Basically, ethanol is produced in India from two feedstocks.

First is sugarcane and second is grains, which includes rice supplied at concessional rates from FCI depots, maize and damaged grains (which is broken rice only).

Of this, FCI rice is the most preferred as it has high starch content, which is beneficial for the production of ethanol.