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Price and policy push: Ethanol cheaper than petrol, sweet spot for sugar industry

Petrol at Rs 90-plus per litre is pinching client pockets. But for Indian sugar mills, it has opened up alternatives – and a method out of the issue of cane fee dues to farmers.

Oil advertising firms (OMC) are set to acquire 283 crore litres of ethanol from mills for mixing as much as 10% with petrol in 2020-21 (December-November).

This is towards 167 crore, 179 crore and 150.5 crore litres within the previous three provide years and a mere 38 crore litres in 2013-14.



Moreover, of the 283 crore litres, solely 59.7 crore includes ethanol usually produced by mills from ‘C’ molasses, the leftover cane syrup after a lot of the sugar has been extracted and crystallised.

The stability provide could be ethanol from fermentation of entire sugarcane juice (42.2 crore litres) and the intermediate ‘B-heavy’ stage molasses (181 crore litres).

Mills may even be paid extra for ethanol produced from ‘B-heavy’ molasses (Rs 57.61/litre) and cane juice (Rs 62.65/litre) than from the standard ‘C’ molasses route (Rs 45.69/litre).

The complete projected ethanol purchases by OMCs in 2020-21 could be value practically Rs 15,800 crore.

Significantly, the Rs 62.65/litre ex-mill rate for ethanol from cane juice is method beneath the Rs 91.17/litre retail value of petrol in Delhi. The distinction is principally because of taxes: Petrol attracts a Central excise responsibility of Rs 32.90 plus a Rs 21.04/litre state tax in Delhi.

“Ethanol today requires no subsidy. The government only has to ensure it is taxed less than petrol,” stated a sugar industry supply.

Ethanol, a biofuel, might be blended with petrol to kind completely different blends and lower India’s dependence on imported oil. Also, the oxygen in ethanol helps blended petrol burn extra utterly and so lower emissions.

Ethanol, containing 99.5% alcohol, is chargeable to solely a 5% items and providers tax (GST). This is not like rectified spirit or potable-grade additional impartial alcohol, having 95-96% purity and topic to a bunch of state authorities levies.

But the 5% GST on ethanol, slashed from 18% in July 2018, has notional worth. This is as a result of fuels are out of GST and OMCs can not declare any enter tax credit score.

Also, excise and state tax are levied on petrol after ethanol-blending, which the OMCs do of their depots and not refineries.

“Ideally, these taxes should be only on unblended petrol at the refinery gate. The OMCs will, then, have incentive to blend more ethanol, which attracts only a flat 5% GST,” the supply added.

The absence of any substantive tax benefit however, India’s ethanol manufacturing capability has doubled from 215 crore litres in 2014-15 to 426.6 crore litres in 2019-20.

Most of this capability addition has come after May 2018, when the Narendra Modi authorities unveiled a brand new biofuels programme concentrating on 10% all-India common ethanol mixing in petrol by 2022 (from 4.2% in 2017-18) and 20% by 2030.

From 2018-19, the federal government additionally started fixing larger ex-mill costs for ethanol derived from ‘B-heavy’ molasses and cane juice than that from ‘C’ molasses feedstock.

The new ethanol mixing and pricing policy has been a game-changer, based on Roshan Lal Tamak, govt director & CEO (sugar business), DCM Shriram Ltd.

His company, in December, commissioned a Rs 292-crore distillery adjoining its sugar mill at Ajbapur in Uttar Pradesh’s Lakhimpur Kheri district. With a 200 kilolitres per day (KLD) ethanol manufacturing capability, it’s the state’s largest single-location distillery.

Mills usually crush cane with 13.5-14% complete fermentable sugars (TFS) content material.

From each tonne of cane, they’ll get well as much as 115 kg (11.5%) of sugar. The un-crystallised, non-recovered TFS (2-2.5%) goes into ‘C’ molasses that yields about 10.67 litres of ethanol.

Alternatively, they’ll extract simply 10% sugar (100 kg) and divert the 1.5% additional TFS to an earlier ‘B-heavy’ stage molasses yielding some 19.42 litres of ethanol. A 3rd possibility is to not make any sugar and ferment the complete 13-5-14% TFS within the cane to supply round 76 litres of ethanol.

At present ex-factory sugar realisations of Rs 32/kg, many mills are discovering it viable to supply extra ethanol by means of the ‘B-heavy’ molasses route.

The Indian Sugar Mills Association has estimated diversion of 20.10 lt sugar for ethanol manufacturing from ‘B-heavy’ molasses and cane juice within the 2020-21 season. That contains 6.74 lt in UP, 6.55 lt in Maharashtra and 5.41 lt in Karnataka.

With India’s common annual sugar manufacturing of 300 lt outstripping home consumption of 255-260 lt, there may be scope for additional diversion.

“Besides being an indigenous green fuel, ethanol will help mills make timely payments to cane farmers. The present programme can be accelerated by increasing the blending mandate in major ethanol-producing states and promoting production from direct cane juice,” stated Tanak.


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