Centre encouraging sugar mills to divert excess sugarcane to ethanol

15 December 2022, New Delhi: The Union Minister of State for Consumer Affairs, Food and Public Distribution, Ms. Sadhvi Niranjan Jyoti in a written reply to a question in Lok Sabha today shared that in a normal sugar season, production of sugar is around 320-360 Lakh Metric Tonne (LMT) as against the domestic consumption of 260 LMT which used to result in huge carryover stock of sugar with mills. This excess stock used to lead to blockage of funds & affected the liquidity of sugar mills resulting in delayed payment of cane dues & resulting in accumulation of cane arrears.

To find a long-term solution to address the problem of excess sugar, the Government is encouraging sugar mills to divert excess sugarcane to ethanol. The government has fixed a target of 20% blending of fuel-grade ethanol with petrol by 2025. In sugar seasons 2018-19, 2019-20, 2020-21& 2021-22 about 3.37, 9.26, 22 & 36 LMT of sugar respectively has been diverted to ethanol. In the current sugar season 2022-23, about 45-50 LMT of excess sugar is targeted to be diverted to ethanol. By 2025, it is targeted to divert 60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, and improve the liquidity of mills thereby helping in the timely payment of cane dues of farmers.

Also, intending to improve the liquidity position of sugar mills and to enable them to make timely payments of cane dues of farmers, Central Government had taken various measures viz. extended assistance to sugar mills to facilitate the export of sugar; extended assistance to mills for maintaining buffer stocks; extended soft loans to sugar mills through banks to clear cane price dues; fixed Minimum Selling Price of sugar, etc.

 In sugar seasons 2019-20, 2020-21 & 2021-22 about 59.60 LMT, 70 LMT& 109 LMT of sugar was exported respectively.

As a result of these measures, the financial conditions of sugar mills have improved and more than 99% of cane dues up to sugar season 2020-21 and 97.40% of cane dues for sugar season 2021-22 have been cleared.

To support the sugar sector and in the interest of sugarcane farmers, the Government is encouraging sugar mills to divert excess sugarcane & sugar to ethanol. The government has allowed the production of ethanol from B-Heavy molasses, sugarcane juice, sugar syrup, and sugar and has also been fixing the remunerative ex-mill price of ethanol derived from various feedstocks. 

To achieve blending targets, the Government is encouraging sugar mills and distilleries to enhance their distillation capacities for which the Government is facilitating them to avail loans from banks for which interest subvention @ 6% or 50% of the interest charged by the banks whichever is lower is being borne by Government. As the revenues generated from the sale of ethanol by sugar mills/distilleries reach the accounts of sugar mills in around 3 weeks as against 3-15 months taken from the sale of sugar, production of ethanol would improve the liquidity of sugar mills enabling them to make timely payment of cane dues of sugarcane farmers. 

In the past three Ethanol Supply Years (December- November), the revenue of about Rs. 48573 crores has been realized by sugar mills from the sale of ethanol to Oil Marketing Companies (OMCs), which has helped sugar mills/molasses-based distilleries to make timely payment of cane dues of farmers.

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