For the cash-strapped sugar industry in Uttar Pradesh, the expression of interest (EoI) floated by OMCs to procure 97 crore litre of ethanol at Rs 42 a litre ex-mill should have been like manna from heaven. But despite this, the mood in the industry is rather depressed, mainly because of detailed state procedures which delay the movement of ethanol outside it.

Talking to FE, an official from a sugar mill said that because of procedural delays in UP, the mills have to carry the ethanol for a longer period, which not only blocks their cash flow but also adds to costs, including carrying cost. “According to the system prevailing in UP, preference is given to country liquor in supply of molasses. As a result, sugar mills have to seek advance permission before despatch either of molasses or ethanol or any other derivative of molasses. The current apprehension of the excise department is that, with reduced crushing, molasses might fall short and so severe restrictions have been put on issuance of permit. This hampers free trade and easy availability and for ethanol this means delay in reaching the OMC depot, which results in imposing of penalty,” the miller said.

Sugar mills in UP have already started defaulting in payment of Rs 240/tonne for cane procured from farmers. “The price of sugar has fallen to under Rs 2,750/quintal. Our mills are unable to sell stock in the market due to  weak sentiment and presence of heavy floating stock. And our problem is greatly compounded by the fact that sugar from Karnataka and Maharashtra is finding place in our traditional markets at prices which are around Rs 200/quintal cheaper than that of sugar from UP. This is possible due to their low cost of production,” said Deepak Guptara, secretary of UPSMA, adding that while mills from these states are also facing hardship in paying FRP of Rs 220/quintal, it can well be understood what kind of pressures the industry is facing in UP, where mills have to pay Rs 240/quintal as first installment of the Rs 280/quintal SAP fixed by the state.

Regarding the procedural hiccups in getting ethanol permits, DG of ISMA, Abinash Verma, had written to the UP government earlier this year, stating that delay in issuance of export permit for movement outside the state is due to one of the requirements of the UP excise department, which seeks the genuineness of NoC from the importing state’s excise department. “The said process is taking a lot of time, where a letter is sent by UP state excise to importing state excise seeking genuineness of NoC. UP then issues an export permit only after receipt of reply from importing state excise. Since ethanol is supplied to public sector navratna oil companies i.e. Indian Oil, Bharat Petroleum and Hindustan Petroleum, enjoying good reputation and size, the formality of obtaining genuineness of certificate is perhaps unnecessary,” he wrote.

However, nothing much seems to have moved on that count in UP and while the bonanza in the form of OMCs seeking bids from ethanol manufacturers by January 12 has come as a windfall, the mills in UP are hardly prepared.

“The ethanol blending programme can go a long way in improving our fiscal condition. It can help the industry deal with surplus sugar and avoid distress sale as well as help pay the cane price.