Prioritising grain-based ethanol in Bihar and MP has increased losses of molasses-based ethanol manufacturers, says ISMA
Synopsis
Oil marketing companies (OMCs) have signed long-term purchase agreements with the new grain-based distilleries in Bihar and MP. According to ISMA, the preference given to grain-based distilleries in these states has resulted in making ethanol supplies non-viable for the sugar-based distilleries from these two states.
The Indian Sugar Mills Association (ISMA) has sought a “clear policy direction” from the government on setting up new ethanol distilleries, saying policies prioritising procurement of ethanol from grain-based distilleries in Bihar and Madhya Pradesh have affected the viability of sugar-based ethanol manufacturers in these states.
Sugar-based ethanol manufacturers in Bihar and MP have been forced to supply ethanol to southern states, which is causing them huge losses as they have to bear the high transportation costs, ISMA chief AdityaJhunjhunwala told ET.
“One sugar-based ethanol supplier from Bihar was asked to supply to the southern states. However, the transport charges given by the OMCs are less than the actual cost of transport incurred by the ethanol suppliers,” Jhunjhunwala said.
In a letter to the secretary, Department of Food and Public Distribution, ISMAsaid to achieve 20% blending by 2025-26, the government needs to incentivise ethanol from sugar by increasing its price and extending similar benefits as given to the grain-based distilleries.
Oil marketing companies (OMCs) have signed long-term purchase agreements with the new grain-based distilleries in Bihar and MP. According to ISMA, the preference given to grain-based distilleries in these states has resulted in making ethanol supplies non-viable for the sugar-based distilleries from these two states.
“The supply (of ethanol) from juice has been less and below the government expectation due to the viability of the current price. Without the proper returns, the industry and the banks will not be able to make additional investments,” ISMA said in the letter.
“To achieve 20% blending by 2025-26, we need 1,200 crore litres of ethanol. In 2022-23, the sugar industry contracted for supply of 400 litres of ethanol, which needs to be taken to a minimum 800 crore litres and beyond. The new capacities will need a clear government policy and an investment of Rs 17,500 crore with a reasonable return on investment.”
Jhunjhunwala said the sugar industry needs a clear policy direction from the government for setting up new distilleries. “We will have to set up new green field projects to achieve the target of 20% blending. This will need a clear government policy and continuation of schemes like the interest subvention scheme and a price of Rs 69.85 per litre ,” said Jhunjhunwala.
Jhunjhunwala said the sugar industry needs a clear policy direction from the government for setting up new distilleries. “We will have to set up new green field projects to achieve the target of 20% blending. This will need a clear government policy and continuation of schemes like the interest subvention scheme and a price of Rs 69.85 per litre ,” said Jhunjhunwala.
ISMA has demanded that like the grain-based distilleries, the government should either sign the tripartite-cum-escrow agreement (TPA) with sugar-based distilleries or buy the ethanol at ex-factory rate.
Realising that the sugarcane molasses-based ethanol will not be sufficient for meeting the 20% blending target, the central government has started focussing on grain-based ethanol in grain surplus states like Bihar, Jharkhand and Madhya Pradesh.
However, this year, the grain-based ethanol manufacturers are facing uncertainties about the supply of rice, the main raw material as Food Corporation of India has stopped supplying rice for ethanol manufacturing.
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