Centre’s Ethanol Policy Shift: Impact on Sugar and Ethanol Industries

Central Idea

• The Centre has taken significant steps to increase domestic sugar availability, including banning sugar exports and restricting the diversion of sugar for ethanol production.
• On December 7, the Ministry of Consumer Affairs, Food and Public Distribution directed mills and distilleries not to use sugarcane juice/syrup for ethanol production.

Ethanol Blended Petrol (EBP) Programme

• Programme’s Success: The EBP programme, a key achievement of the government, has seen ethanol blending with petrol increase from 1.6% in 2013-14 to 11.8% in 2022-23.
• Feedstock Diversification: The success is attributed to diversifying feedstocks, including C-heavy molasses, B-heavy molasses, sugarcane juice/syrup, and grains.

Ethanol Production from Different Feedstocks

• C-heavy Molasses: Traditionally used for ethanol production, yielding 220-225 litres of ethanol per tonne.
• B-heavy Molasses: Provides higher ethanol yield (290-320 litres per tonne) compared to C-heavy molasses.
• Direct Fermentation of Sugarcane: Fermenting the entire sugarcane without sugar extraction yields 80-81 litres of ethanol per tonne.

Centre’s Ethanol Blending Scheme: Food vs. Fuel Debate

• Increased Ethanol Production Post-2017: The use of B-heavy molasses and sugarcane juice/syrup, along with new substrates like surplus rice, broken grains, and maize, boosted ethanol production.
• Differential Pricing Policy: The government incentivized ethanol production from non-C-heavy molasses feedstocks with higher prices.
• Impact on Industry: Companies like Triveni Engineering & Industries Ltd (TEIL) adapted to multiple feedstocks, including grain during the off-season.

Challenges and Setbacks for the Industry

• Directive’s Impact: The December 7 directive is a setback, especially for companies with capacities to produce ethanol from cane juice/syrup.
• Tender for Ethanol Supply: The OMCs’ tender for 825 crore litres of ethanol for 2023-24 might be affected, particularly the 135 crore litres from sugarcane juice/syrup.
• Uncertainty in Pricing: The Centre has not announced prices for various ethanol feedstocks for 2023-24, despite the ethanol supply year aligning closer to the sugar year.

Sugar Supply Concerns and Policy Implications

• Low Sugar Stocks: The 2022-23 sugar year ended with low stocks, prompting the government to prioritize domestic sugar supply.
• Uncertain Production Forecasts: The National Federation of Cooperative Sugar Factories predicts a decrease in sugar production for 2023-24.
• Government’s Prioritization: The latest decisions reflect the government’s focus on domestic supply and consumer needs over exports and fuel production.

Conclusion

• Shift in Government Policy: The Centre’s recent actions indicate a shift towards prioritizing domestic sugar availability over ethanol production.
• Broader Implications: These decisions impact both the sugar and ethanol industries, reflecting the complex balance between food security and renewable energy initiatives.