Agriculture Industry

Demand for ethanol not to impact ‘sugar’ supply

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14 February 2022, New Delhi: Indian sugar millers are confident that demand for ethanol will not impact the sugar availability in the market as the country’s problem is not shortage but that of surplus and not knowing what to do with it. 

India is likely to continue producing more even after diversion and so it will continue to struggle with surplus stock unless there is some major drought, which could then affect cane production, the sugar industry claims. Domestic requirement of sugar during the current 2021-22 (October-September) season is estimated to be close to 265 lakh tonne. 

The country’s opening stock as on October 1, 2021 was at around 82 lakh tonne, as per the estimates put out by Indian Sugar Mills Association (ISMA). The total output in the current season is estimated to be close to 315 lakh tonne, which is higher than the first advance estimates put out by ISMA in October last year at around 305 lakh tonne. So there is extra availability to the tune of close to 130 lakh tonne. In fact, of this, some amount would be exported, the industry claims. 

“The kind of sugarcane being produced is of very high quality. The productivity is higher and the sucrose content is also higher. So we do not expect availability of sugarcane to be affected because of diversion to ethanol. In fact, the production of 315 lakh tonne is after taking into consideration the estimated diversion towards ethanol,” Abinash Verma, director-general, ISMA told  BusinessLine

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The government has notified the National Bio-fuel Policy, 2018. In the latest Budget, to give the programme a further push two fresh ethanol blended fuel categories were added and additional excise duty imposed on un-blended fuel. 

 “If I say I am going to divert 34 lakh tonne of sugar equivalent to ethanol, yet we will be producing 315 lakh tonnes of sugar against the domestic requirement of 265 lakh tonne. Next year even if the requirement were to grow to around 267-268 lakh tonne as normal growth in demand and we divert 5-10 lakh tonnes of sugar equivalent to ethanol we are still at about 305 lakh tonne of production next year. So assuming the growth in demand over next two years, we will still be producing much more than what we require domestically even after diversion,” he said. 

Dealing with surplus 

The problem is not shortage but that of surplus. According to the industry, the exports have been good this year because of good demand as Brazil was producing much less. But if Brazil comes back on track next year then the global sugar production would be higher and it may not augur well for prices. 

“So the number suggests unless there is a major drought in the country which nobody can do anything about, for the next 5-8 years there will not be any shortage in supply of sugar versus the domestic requirement,” he pointed out. 

The price of ethanol being fixed by the Centre is kind of related to a certain price of sugar. “The moment there is more or less equilibrium in demand and supply of sugar we will see sugar prices moving up and if that happens the ethanol production will be lower. This is exactly what the Brazilians do, if sugar prices are higher they produce more of sugar and if ethanol prices are better they produce more of ethanol. So I do not believe we will run short of sugar for our domestic market as that equilibrium will ensure that people will produce less of ethanol if sugar prices are better,” he said. 

For example, Balrampur Chini Mills plans to crush 5-7 per cent more cane during the current sugar season, the company said in its recent investor presentation along with the third quarter results (October-December 2021). Nearly 86 per cent of the company’s revenue comes from its sugar business while the remaining 13-14 per cent comes from its distillery business. It aims to increase the share of distillery in its total business to close to 35 per cent over the next three years. 

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