The oil ministry may seek the Cabinet's approval to increase the price offered by oil marketing companies to sugar mills that make ethanol from B-heavy and C-heavy molasses in 2020-21 (Dec-Nov), two sources close to the development said. The move may be aimed at addressing the glut in the domestic sugar market.
"A note regarding ethanol price hike has been forwarded to the JS (joint secretary, sugar) and may be taken up in CCEA (Cabinet Committee on Economic Affairs) by the end of this month," one of the officials said.
Speculation is rife that the government may raise the price of ethanol derived from B-heavy molasses by 3.0 rupees per ltr, and the price of ethanol from C-heavy molasses by 1.5 rupees.
For 2019-20, the government has fixed the price of ethanol derived from high-yielding B-heavy molasses at 54.27 rupees per ltr, and 59.48 rupees for ethanol made directly from 100% cane juice and sugar syrup. The price of ethanol derived from C-heavy molasses is currently 43.75 rupees per ltr.
A hike in ethanol prices is being considered to reduce the glut in the domestic market, and because the fair and remunerative price of sugarcane is likely to be raised next season. The food ministry has floated a Cabinet note on hiking the fair and remunerative price of sugarcane by 10 rupees per 100 kg to 285 rupees for 2020-21 (Oct-Sep), the government officials said.
The Indian Sugar Mills Association has estimated opening stocks of sugar for 2020-21 at 11.5 mln tn. Production of sugar next season is seen at 30.5 mln tn, 12.1% higher than 27.2 mln tn estimated for the ongoing season, both higher than the annual domestic consumption of 25.0-25.5 mln tn.
Oversupply of sugar has led to depressed prices, crippling the ability of mills to pay outstanding dues to cane farmers and ethanol seems the only way out. Many mills in the country have realised that diversion of 100% cane juice and B-heavy molasses for production of ethanol gives better returns and is not technologically challenging, which is also likely to spur diversion of excess cane to the biofuel.
The government is giving loans to sugar mills with interest subvention of 40.45 bln rupees for a period of five years for enhancement and augmentation of ethanol production capacity. However, banks are reluctant to give loans to some mills due to their stressed balance sheets.
As of Jul 27, sugar companies had signed contracts to supply 1.75 bln ltr of ethanol to oil marketing companies, and have supplied 1.10 bln ltr of the green fuel, according to data from ISMA.
As per the National Biofuels Policy 2018, the government aims to achieve ethanol-petrol blending rate of 10% by 2022 and 20% by 2030. End