B S : What is the present status of the alcohol based industry ?
Ashok Kadakia : In India, alcohol based industry was set up in the late 1950s. This route to petrochemicals products was selected at a time when petrochemicals like naphtha was not available and the production of sugar was growing in the country.
Molasses then proved to be a boon as it proved to be much needed industrial alcohol for producing downstream chemicals.
Since then, this industry has never looked back. There have been hiccups now and then, besides the ever changing government policies. The sugar production and exports of molasses play a vital role in price fluctuations.
The present status of the alcohol based industry varies from state to state.
In Maharashtra, alcohol prices have increased by 20 per cent last month i.e. it went up from Rs 8 to Rs. 9.50 per litre. And the molasses prices plateaued at Rs 1,100 per metric tonne ex-factory, which affected the downstream industry very adversely.
At present, quite a few distilleries are closed because of pollution caused by effluent discharge.
The government has come down very heavily on distilleries that do not have effluent treatment plants. The investment for the same is very high which many distillers are not able to meet. Some of the distilleries attached to the sugar factories are seasonal.
These distilleries operate only when the sugar factories are in operation.
Import of alcohol and molasses from the other states is not feasible. In fact, in Maharashtra, there is a ban on alcohol and molasses exports hence the situation here is under control, whereas in Gujarat, alcohol and molasses prices have witnessed a spurt as a result of exports to other states which necessitated the import of alcohol from other states like U P.
Keeping these factors in view, the industry had to restructure itself to meet this multifold challenges. Prevailing high alcohol prices have compelled many units to down their shutters as the production has totally become quite uncompetitive.
BS: Could you explain why the fortunes of alco-based chemical industry fluctuates with changes in molasses prices.?
AK: Since there is a petro route the prices of molasses do play a very important role. The government has levied excise duty at a flat rate of Rs 500/=per tonne of molasses, which earlier was 20 per cent of the value. This has made molasses more dearer. As a result, the alcohol prices have also seen a rise.
However, market forces also play a very important role. The increase in the molasses prices acts as a catalyst in the alcohol based chemical industry.
BS: What is the government's policy vis-a-vis your industry ?
AK: The Maharashtra government has banned the export of both molasses and alcohol in the domestic as well as in the foreign market, which has kept the prices of these commodities in check to a certain extent.
Secondly, denaturing of alcohol in Maharashtra is not appropriate in a sense that the denaturement is being used as a monopoly.
There is only one manufacturer of denaturent in the country. Hence, they are ruling the roost. In spite of many representations made to the government, they are not willing to do anything to improve the situation.
One good decision the government has taken is that of adopting very stringent measures towards the polluting industries.
There again the government should give some time to the black listed distilleries to put up effluent plants as it involves quite a huge investments.
BS: With the process of liberalisation, how do you see the post GATT scenario ?
AK: The liberalisation policy adopted by the government has made the imports cheaper which has led to the tough competition. We have to study and watch constantly the international prices.
But, again I maintain that despite rising prices of alcohol, it is the market forces which will play a very important role as the import tariffs have come down, we will have to be more and more competitive in quality and prices, besides meeting the delivery schedules.
BS : Please comment on the R & D efforts with regards to your industry.
AK: As regards to process, there is not much change, it is as it was a decade ago. Of course, small changes have been incorporated so as to save energy and some structural changes to improve the output. Many alcohol-based industries are trying out new methods to increase yields besides installing effluent treatment plants.
Projects and Development India Ltd a government undertaking in Bihar, has developed catalyst to suit most of the chemical industries and thereby effecting a saving of import of catalysts.
Conservation of energy by using alternate methods such as coal, steam and even re-cycling by a process of methane recovery has been undertaken.
More and more entrepreneurs are going in for diversification and exploring possibilities of exporting value added chemicals which we were importing earlier rather than allowing the exports of the basic feedstock.
BS : What is the present price trend of the industrial alcohol and molasses ? How do you see the emerging trends in the coming days ? Why ?
AK: The season has come to an end. As a result, the price of alcohol may go up further in Maharashtra.
But molasses prices are very likely to remain steady. It all depends on how long the ban on exports of alcohol and molasses will last. If the ban lifted, the scenario will change for the worst for the industry.
BS : What are the current problems faced by your industry, can you suggest some remedies?
AK: In Maharashtra, there are problems of denaturent and the imposition of flat rate of excise on molasses. And the third is forcefully closing the distilleries for the want of effluent treatment plants instead of giving them enough time to take the necessary action. While, in Gujarat the problems are manifold.
First and foremost is the export of molasses and alcohol followed by the pollution and the last but not least is the power situation.
We have been making representations to the state as well as the central government to look into these bottle-necks.
There should be some price structuring where alcohol and molasses prices and taxes are concerned. There should be uniformity in prices.
