Maharashtra Sugar Commissioner Shekhar Gaikwad has advised the industry to divert 25 per cent cane for ethanol production for the next season. However, sugar millers in Maharashtra are circumspect as uncertainties regarding price and lifting continue to haunt the sector, despite special schemes announced by the central government last year to expand their ethanol production and allowing them to produce it directly from cane juice. Millers now say they are looking for long-term commitment from the central government to keep prices steady for at least 10 years, which will allow them to recover investments in new machinery.

Excess production and low uptake of sugar have had an adverse effect on the economics of sugar mills. Mills had defaulted in payment of the Fair and Remunerative Price (FRP), fixed by the central government for cane that millers purchase from growers. Last year, in order to help millers develop a permanent solution to this problem, the central government had announced a new ethanol policy, which was in line with its scheme to achieve 10 per cent blending of ethanol into petrol to bring down import bills. Till date, only 6 per cent blending has been achieved.

The policy was to allow mills to expand their existing capacity for ethanol production. The government had also allowed production of ethanol directly from cane juice, as well as from C heavy and B heavy molasses. A financial package saw the government allowing for mills to avail soft loans for expansion/construction of new facilities. A total of 60 mills from Maharashtra were found eligible for availing this loan. However, none of the new facilities will be ready before the next crushing season, given the time taken for completion of paper work.

At present, 69 cooperative, 32 private and nine stand-alone units in the state have distillery units, and total production capacity is 136.70 crore. 56 mills (31 cooperative, 23 private and 2 stand-alone units) have exclusive ethanol production facility with a capacity of 71.26 litres.

The central government has fixed three price slabs for ethanol, depending on the source of production. The highest price is fixed for ethanol produced directly from cane juice (Rs 59.19 per litre), followed by C heavy molasses (Rs 43.47 per litre) and B heavy molasses (Rs 52.23 per litre). “The present rates are conducive, but we need assurance from the government that these prices will remain the same for at least 10 years,” said a miller from Kolhapur.

Another worry for millers is that most mills are not utilising their capacity. Maharashtra’s requirement for 10 per cent blended fuel is 44 crore litres, while across the nation, oil companies have floated tenders of 450 crore litres.