The sugar industry has asked the Prime Minister's Office to announce a long-term pricing formula for ethanol to attract more investment.
It has also asked the government to announce the method used to calculate ethanol prices, which will bring about transparency and assure investors of long-term stability in policy, Indian Sugar Mills Association said in a letter addressed to the Prime Minister's Office.
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More diversion of cane towards ethanol rather than sugar would help reduce the glut in the sugar market and greater use of the biofuel would reduce India's dependence on crude oil imports, ensure energy security, reduce pollution, and generate local jobs.
The Centre has introduced differential pricing for ethanol derived from 100% cane juice, damaged foodgrain, sugar syrup, B-heavy and C-heavy molasses, but the formula used to calculate prices differently is not known.
For 2019-20 (Dec-Nov), the government has increased the price of ethanol made from B-heavy molasses to 54.27 rupees a ltr from 52.43 rupees a ltr in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to 59.48 rupees a ltr and 43.75 rupees a ltr, respectively.
The industry has also asked the government to create a price stabilisation fund to fill the gap between the fair and remunerative price and the price that mills pay farmers as per their actual revenue realisation.
The sugar industry is currently facing headwinds due to high cane prices that mills are obligated to pay farmers. The fair and remunerative price of cane has doubled in the last 10 years while prices of sugar have hardly moved up.
The Commission for Agricultural Costs and Prices has also recommended that revenue sharing formula should be used to determine the price of sugarcane, it said.
According to the farm panel's report, returns to farmers from wheat and cotton together are only half of that from cane, while returns from paddy and wheat are 49%, and from soybean and wheat 34%.
"Revenue sharing formula and price stabilisation fund... will go a long way to make the Indian sugar industry globally competitive and less dependent on government subsidies," the letter said.
The current fair price of cane is linked to a basic sugar recovery rate of 10% but some mills get a higher recovery rate due to which they have to pay a premium to farmers over and above 275 rupees per 100 kg.
Mills use improved technologies and efficiency which gives them a higher recovery rate but premium is only given to farmers. The industry wants that the premium be equally shared between both sugar mills and farmers, and has asked the government to increase the basic recovery rate to 10.5%.
The industry is also seeking more budgetary allocation for subsides and assistance from the government so that payments can be made on time.
The government provided subsidies on exports of sugar in 2018-19 (Oct-Sep) and 2019-20, but the food ministry is yet to complete payments for the previous season.
For the previous season, only payment of 10 bln rupees of the nearly 30 bln rupees has been made for export subsidy claim, while buffer subsidy of 2.7 bln rupees out of 8.56 bln rupees has been completed.
"Delay in settlement of claims of previous season's subsidies is affecting exports in the ongoing season as a lot of money is getting stuck as international prices are very low compared to domestic prices, and government's working is so loose we are not sure when we would get the money... Big mills are using their own funds to export but what about small mills," an official at a leading Uttar Pradesh-based mill said. End