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Ethanol blending: Govt doubles incentive on sugar diverted for ethanol production

To encourage sugar mills to divert excess sugar for the production of ethanol, the government has announced the doubling of incentive on sugar sacrificed for producing ethanol
Ethanol blending: Govt doubles incentive on sugar diverted for ethanol production
Ethanol blending: Govt doubles incentive on sugar diverted for ethanol production
  • Every sugar season (October- September), production of sugar is around 320-330 Lakh Metric Tonne (LMT) as against the domestic consumption of 260 LMT
  • The Centre has fixed a target of 10 percent blending of fuel grade ethanol with petrol by 2022 and 20 percent blending by 2025

New Delhi: With a view to encourage sugar mills to divert excess sugar cane, sugar for the production of ethanol and to achieve the targets of the ethanol blending programme, the government has announced the doubling of incentive on sugar sacrificed for producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar from October this year, an official statement released on Friday said. “Now, those sugar mills which will be diverting sugar to ethanol would be getting the entire quantity of sugar sacrificed on producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar in their monthly release quota,” the statement added.

To maintain the demand supply position of sugar in the country, to stabilise ex-mill prices of sugar and to ensure sufficient availability of sugar for domestic consumption, mill-wise monthly release quota of sugar for domestic sale by sugar mills is allocated by the Department of Food and Public Distribution under the Ministry of Consumer Affairs, Food and Public Distribution, every month on the basis of stocks held by them, export performance and diversion of sugar to ethanol.

60 LMT of sugar can be diverted for ethanol production

According to data released by the government, every sugar season (October- September), production of sugar is around 320-330 Lakh Metric Tonne (LMT) as against the domestic consumption of 260 LMT, which results in huge carry over stock of sugar with mills. Due to excess availability of sugar in the country, the ex-mill prices of sugar remain subdued resulting in cash loss to sugar mills. This excess stock of 60 LMT, which leads to blockage of funds and affects the liquidity of sugar mills resulting in accumulation of cane price arrears, can easily be diverted for ethanol production for the blending programme.

“With a view to prevent cash loss to sugar mills caused due to subdued sugar prices, the government in June 2018 introduced the concept of Minimum Selling Price (MSP) of sugar and fixed the MSP of sugar at Rs 29/ kg which was revised to Rs 31/ kg wef 14.02.2019,” said the statement.

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To liquidate excess stocks, the Centre has also been extending assistance to sugar mills to facilitate export of sugar. In sugar seasons 2017-18, 2018-19 and 2019-20, about 6.2 LMT, 38 LMT and 59.60 LMT of sugar was exported. In previous sugar season 2020-21, against a target of 60 LMT, contracts of about 70 LMT had been signed, 67 LMT had been lifted from mills and more than 60 LMT had been exported till September 28. The international prices of sugar are in uptrend, so, contracts for export of about 15 LMT have been signed to export sugar in the sugar season 2021-22 and that too without announcement of any export subsidy. It is expected that in the sugar season 2021-22 as well, India can export about 60 LMT of sugar.   

Backdrop

The Centre is taking several steps for diversion of sugar to ethanol. In order to find a permanent solution to address the problem of excess sugar, the government is encouraging sugar mills to divert excess sugarcane to ethanol. The Centre has fixed a target of 10 percent blending of fuel grade ethanol with petrol by 2022 and 20 percent blending by 2025.

It is expected that in the current ethanol supply year 2020-21 (December-November), about 300-325 crore litres of ethanol is likely to be supplied to OMCs to achieve 8-8.5 percent blending levels. As on September 26, against the contracts of 349 crore litres, 252 crore litres of ethanol have been supplied by sugar mills, distilleries to OMCs for blending with petrol, thereby achieving 8 percent blending. 

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