As sugar exports face WTO bottlenecks, Government diverts excess sugar to ethanol

• Diversion of excess sugar to ethanol to enhance income of sugarcane farmers and to achieve ethanol blending target

• Loans of about Rs. 3600 crores sanctioned for 70 ethanol projects in last two years

New Delhi: In the normal sugar season, about 320 Lakh Metric Tonnes of sugar is produced against domestic consumption of 260 LMT.  This 60 LMT of surplus sugar which remains unsold, blocks funds of sugar mills to the tune of about Rs. 19,000 crore every year thereby affecting liquidity positions of sugar mills resulting in accumulation of cane price arrears of farmers.

To deal with surplus stocks of sugar, sugar-mills are now being encouraged by the Government to export sugar, for which Government has been extending financial assistance. However, India being a developing country can export sugar by extending financial assistance for marketing and transport only up to year 2023 as per World Trade Organisation (WTO) arrangements.

So, as a long term solution to deal with surplus sugar, to improve sustainability of sugar industry and to ensure timely payment of cane dues to farmers, Government is now resorting to diversion of excess sugarcane and sugar to ethanol for supplying to Oil Marketing Companies for blending with petrol which not only would reduce import dependency on crude oil, promote ethanol as a fuel which is indigenous and non polluting, but will also enhance income of sugarcane farmers.

“Earlier, the Government had fixed a target of 10% blending of fuel grade ethanol with petrol by 2022 and 20% blending by 2030 but now, Government is preparing a plan to prepone achievement of  20% blending target,” the Ministry of Consumer Affairs, Food & Public Distribution, said today.

However, as the existing ethanol distillation capacity in the country is not sufficient to produce ethanol to achieve blending targets, Government now wants sugar mills, distilleries and entrepreneurs to set up new distilleries and to expand their existing distillation capacities. For this it is extending financial assistance by way of interest subvention for 5 years at 6% maximum rate of interest against the loans availed by sugar mills/ distilleries from banks for setting up their projects. In past 2 years, loans of about Rs. 3600 crores have been sanctioned for 70 such ethanol projects (molasses based distilleries) which involve capacity enhancement of 195 crore litres; out of these 70 projects, 31 projects have been completed adding a capacity of 102 crore litres so far.

With the efforts made by Government, the existing installed capacity of molasses based distilleries has reached to 426 crore litres. Under the ethanol interest subvention scheme for molasses based distilleries, Government in September, 2020 opened a window for 30 days to invite more applications from sugar mills/ distilleries, which were examined by Department of Food and Public Distribution (DFPD). “About 185 applicants (85 sugar mills and 100 molasses based stand alone distilleries) are being granted in principle approval for availing loan amount of Rs. 12,500 crore for capacity addition of about 468 crore litres per annum. It is likely that these projects would be completed in another 3-4 years, thus help in achieving the desired blending target,” the Ministry stated.

However, as the blending targets cannot be achieved only by diverting sugarcane / sugar to ethanol therefore, Government is also inviting distilleries to produce ethanol from other feed stocks like grains,  for which the present distillation capacity is not sufficient. Therefore, concerted efforts are being made by Government to enhance ethanol distillation capacity in the country by 720 crore litre for producing ethanol from 1^st Generation (1G) feed stocks like sugarcane, molasses, grains, sugar beet, sweet sorghum. With use of other feedstocks, ethanol can be produced in non-sugarcane states also and this will help in distributed ethanol production in the country.

In view of surplus of availability of rice in the country, ethanol can be made from surplus rice. Efforts are also being made to produce ethanol from maize in states which have sufficient production of maize.

– globalbihari bureau