NEW DELHI – Despite higher production, India's exports of molasses is likely to be flat at 500,000 tn in 2018-19 (Oct-Sep), due to higher local consumption, a source at one of the country's leading molasses exporter said.

"Molasses is being used for other purposes in India. Ethanol blending has risen…ethanol making capacity is rising a lot in Uttar Pradesh because of government's policy of allowing soft loans," the source said.

Export deals were struck at $100-140 per tn, similar to the levels in the previous season, he said. 

Molasses is the leftover slurry after sugar has been extracted from cane. It is used mainly to make ethanol, whose use the Indian government has been promoting for blending in auto fuel and to help lift income of sugar mills.

India's sugar production for the current season is mostly over with only few mills now crushing cane.

Following a rise in local demand, the ex-factory prices of molasses have risen to 8,000 rupees per tn from 5,000 rupees in Maharashtra at the beginning of the season, three dealers Cogencis spoke to said.

In Uttar Pradesh, too, where some mills even gave molasses for free at the beginning of the season, prices had now risen to 3,000 rupees a tn, they said.

Demand for molasses is seen firming up in 2019-20 as ethanol blending capacity will also go up, they said. The government's bio-fuel policy aims to achieve 20% ethanol blending with petrol by 2030 and 10% by 2022, from around 7% now. 

"There are chances that exports of molasses may fall in 2019-20 in case production of sugar falls as it is expected to happen in the next season and if prices are better here, exports are bound to be hit," the source said.

Sugar production in India in 2019-20 is expected to fall next year due to likely lower cane production amid chances of lower-than-average monsoon rains.  

US$1 = 70.0250 rupees