Centre sets target of 362 crore litres of ethanol for sugar mills in 2020-21

The ministry of consumer affairs, food & public distribution has directed all sugar-producing states to ensure that 85% of the installed ethanol production capacity is used by the mills, as there are still huge sugarcane price arrears despite the government extending large scale fiscal assistance to the sugar industry.

The government has also set a mill-wise target of ethanol production for every mill that has a distillery attached to it, with an all-India cumulative target of producing 362 crore litre ethanol in 2020-21. The oil marketing companies issued a tender on Thursday with a requirement of 465 crore litres of ethanol.

“There is excess availability of sugar in the country which has been continuously depressing the ex-mill sugar prices, which has adversely affected the realisation on sale of sugar, thereby affecting the liquidity of sugar mills, resulting in accumulation of cane price arrears of farmers,” the ministry stated in a note issued to all sugar-producing states.

To encourage mills to divert sugarcane to produce ethanol for blending with petrol, the government has also allowed production of ethanol from B-heavy molasses, sugarcane juice, sugar syrup and sugar. It has fixed remunerative ex-mill price of ethanol derived from c-heavy molasses at Rs 43.75/litre; from B-heavy molasses at Rs 54.27/litre and Rs 59.48/litre for ethanol derived from sugarcane juice/sugar/sugar syrup for ethanol season 2019-20 (December-November).

The government has fixed 10% blending targets for mixing ethanol with petrol by 2022 and 20% blending targets by 2030.

During the last ethanol supply year 2018-19, about 180 crore litres of ethanol was supplied by sugar mills to oil companies, achieving a 5% blending target.

The ministry has asked state governments to hold meetings with sugar mills and distillers to encourage them to produce ethanol. Currently, even the installed capacity for the production of ethanol has not been utilised by sugar mills, joint secretary of DFPD Subodh Kumar Singh said, advising the millers to use at least 85% of their existing capacity to produce ethanol.

Soft loans of about Rs 18,600 crore are being extended through banks to 362 projects (349 sugar mills and 13 molasses-based standalone distilleries) for enhancing ethanol production capacity for which an interest subvention of Rs 4,045 crore is being borne by the government for five years, he stated in the circular.

Of the 349 sugar mills that have been granted in-principle approvals by the department food & public distribution (DFPD), so far loans have been sanctioned to 64 projects and completion of these capacities will enhance ethanol distillation capacity by 165 crore litres, the joint secretary stated in the note.

Singh pointed out that there is enough demand of ethanol by OMCs and as remunerative prices of ethanol are being fixed by the government, sugar millers may not have any problem of diversion of sugarcane to ethanol. The revenue from production and supply of ethanol to OMCs is realised by mills within three weeks of supply whereas revenue from sale of sugar products is realised within 12-15 months, he said, adding that diverting sugarcane to ethanol will improve cash flows of sugar mills and facilitate them to make timely payment of cane dues.