Centre may raise purchase price of cane ethanol by up to Rs 3 per litre

A formal Cabinet note could be moved in a few days after GoM nod

Ahead of Maharashtra polls, the Central government might increase the price at which Oil Marketing Companies (OMCs) procure ethanol from sugar companies by up to Rs 3 per litre for the 2024-25 marketing season that started from this month.

 

Sources said that a formal cabinet on the same could be moved in the next few days only after the proposal gets clearance from a Group of Ministers (GoM) and other decision making mechanisms.

 

The price increase includes also for ethanol produced from sugarcane juice and B-heavy molasses, production of which was recently allowed again after a gap of nearly a year.

 

In the 2023-24 Ethanol Supply Year (ESY), procurement price of molasses based ethanol produced from sugarcane juice was fixed at Rs 65.61 per litre while that from B-heavy molasses was fixed at Rs 60.73 per litre.

 

The procurement price for ethanol produced from C-heavy molasses was fixed at Rs 49.41 per litre for 2023-24 but was later topped by another Rs 6.87 per litre thus making a total of Rs 56.28 per litre.

 

The special incentive was given to encourage mills to keep producing ethanol from molasses after production through other two routes namely sugarcane juice and B-heavy molasses was stopped.

 

In India, the union cabinet fixes the price at which Oil Marketing Companies (OMCs) purchase molasses based ethanol from sugar companies based on a set formula.

 

While, in case of ethanol from damaged foodgrains (DFGs) and maize, it is based on the mutual understanding between the distilleries and OMCs.

 

Till September 30, 2024, the sugarcane and grain-based distilleries had contracted 7.17 billion litres of ethanol of which 5.85 billion litres (around 82 per cent) was already supplied.

 

Of the 5.85 billion litres, sugarcane contributed around 2.51 billion litres till September 30, 2024 (around 43 per cent), while the rest was contributed from damaged food grains, maize and surplus rice.

 

In ESY-24-25, the OMCs, as per some reports, have invited bids equivalent to around 9.16 billion litres of ethanol. India has achieved a blending target of close to 14 per cent till a few months back.

 

Meanwhile, the National Federation of Cooperative Sugar Factories (NFCSF) in a recent letter to the government had said that the current delay in ethanol price hike despite increasing the FRP along with the December 2023 decision of the government to reduce the use of sugar in ethanol production is badly affecting the sugar industry.

 

It also appealed to the government to raise the Minimum Sale Price (MSP) of sugar which has not been revised since 2018-19.

 

The Indian Sugar and Bio Energy Manufacturers Association (ISMA) in a recent statement issued a few days back estimated the country’s gross sugar production in the 2024-25 season that started from October at 33.3 million tonnes, marginally down from 34.06 million tonnes of last year.

 

However, with an opening stock of around 8.5 million tonnes in 2024-25, total availability of sugar in the country this year is expected to be around 42 million tonnes, ISMA said.

 

Thereafter, expected internal consumption is projected at 29 million tonnes and diversion towards ethanol at 4 million tonnes in 2024-25.

 

This would leave almost 8.8 million tonnes as closing stocks after 2024-25 season, much more than the normative requirement of around 5 million tonnes.

 

"Sufficient availability of sugar will not only ensure a comfortable stock for domestic consumption and sustain the Ethanol Blending Program (EBP), but also open the room for exports, contributing to maintain the financial liquidity of sugar mills, enabling timely payments to farmers," ISMA said.