Sugar firms seek court help against ban on use of cane juice for ethanol

The distillery in its petition to the Karnataka High Court said that as it produces only ethanol and not sugar from cane

Two sugar firms, a distillery and a cooperative sugar mill have approached local courts seeking a stay on the Centre’s December 7 order prohibiting mills from producing ethanol from sugarcane juice in the 2023-24 season.

The courts have stayed the December 7 order for the two mills which submitted the petition.

The central government, according to sources, had also submitted a caveat to be heard in the matter. But there is no official confirmation so far on the Centre’s response.

In its petition to the Karnataka High Court, the distillery mentioned earlier said it produced only ethanol from cane, not sugar, so directing units like it not to use sugarcane for ethanol production would sound the ‘death knell’ for the industry.

The petition filed by a cooperative sugar mill with the Aurangabad Bench of the Bombay High Court, meanwhile, sought that the court declare the December 7 order ‘unconstitutional’ and void ab-initio. It also sought permission to produce ethanol from sugarcane juice and B-heavy molasses in the 2023-24 supply year, which started in November. The courts have stayed the December 7 order only for specific mills.

To achieve the 20 per cent blend target by 2025, around 15 per cent ethanol needed to be doped with petrol by the 2023-24 supply year. But, according to experts, with sugarcane juice and syrup taken out of the matrix — sugarcane juice has emerged as a big source of ethanol in the last few years — blending might not touch even 10 per cent in 2023-24, let alone 15 per cent or more.

Amid protests from sugar companies, the government later modified its order and eased some of the ban conditions, allowing the diversion of 1.7 million tonnes of sugar for making ethanol in the 2023-24 supply year, compared with the 4 million tonnes earlier planned. This should help produce 1.62 billion litres to 1.72 billion litres of ethanol.

Some experts called this a small concession, given that ethanol equivalent to around 2.2 million tonnes of sugar was already in the process of being produced by mills.

The ban is also expected to impact the profitability of sugar companies in the next 6-8 months. Research firm India Ratings said in a research note a few weeks ago that sugar companies’ earnings before interest, tax, depreciation and amortisation (Ebitda) for FY24 and FY25 was likely to be 5-15 per cent lower than the earlier forecasts, with strong sugar prices cushioning the fall emanating from lower distillery Ebitda.