Govt hikes procurement price of ethanol to Rs59.13 a litre

The Cabinet Committee on Economic Affairs has approved an increase in the price of ethanol to be procured from sugar mills for blending with petrol under the Ethanol Blending Programme, in a move that would help reduce the growing sugar surplus with sugar mills.

The decision follows a ministry recommendation to support ethanol production by sugar mills. Accordingly, sugar mills that produce only ethanol will be prioritised, followed by ethanol from B heavy molasses or partial sugarcane juice, and then C heavy molasses, and then ethanol produced from damaged food grains or other sources.
“A new category of procurement is being introduced to incentivise sugar mills that divert all their sugarcane processing capacity for manufacturing ethanol. The mills will be offered Rs59.13 a litre for diverting 100 per cent sugarcane juice to production of ethanol,” minister for petroleum and natural gas Dharmendra Pradhan told the media after the CCEA meeting.
The price of ethanol derived from B heavy molasses has been hiked to Rs52.43 per litre from Rs47.49 a litre. The price of ethanol from C heavy molasses (partially sugarcane juice) has been marginally lowered from Rs43.70 a litre to Rs43.46. 
The revised prices are applicable for the forthcoming sugar season 2018-19 during the ethanol supply year from 1 December 2018 to 30 November 2019.
“Consistent surplus of sugar production is depressing prices... Consequently, sugarcane farmers’ dues have increased due to lower capability of sugar industry to pay the farmers…As the ex-mill price of sugar has increased from the earlier estimated price, there is a need to revise price of B heavy molasses and 100 per cent sugarcane juice for production of ethanol,” a cabinet  release stated.
“This price will compensate for the loss in revenue from the sugar sacrificed. Therefore, sugar mills will be incentivised to divert surplus ‘B’ heavy molasses, which is in abundance, for ethanol production,” director general of Indian Sugar Manufacturers Association, Abinash Verma, said.
“The current constraints on capacities to produce more ethanol will have to be overcome by investing in ethanol projects over 2-3 years. The government announced a policy in June to extend subsidised loans to sugar companies, for which over 150 applications have been submitted. The additional capacities over the next 2-3 years will help the country achieve 10-15 per cent ethanol blending with petrol, probably even before the 2022 target,” he added.
The Ethanol Blended Petrol Programme was launched in 2003 on a pilot basis, and has been subsequently extended to 21 states and 4 union territories to promote the use of alternative and environment-friendly fuels. The government has been notifying the administered price of ethanol since 2014.
The price hike will benefit major sugar mills such as Simbhaoli Sugars, Shree Renuka Sugars, Dhampur Sugar Mills, Dwarikesh Sugar Industries, Balrampur Chini Mills, Avadh Sugar & Energy, Ugar Sugar Works, Gayatri Sugars, Ravalgaon Sugar and Triveni Engineering, all of which recorded big gains in the stock market.
The move will also help reduce the growing sugar surplus and one can expect more diversion of sugarcane towards ethanol, which augurs well for the industry.