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Sugar firms, govt eye truce on ethanol ban

With sugar firms protesting against the government decision to halt production of ethanol from sugarcane juice and syrup in 2023-24 supply year, the Centre along with oil marketing companies (OMCs) are trying to work out a compromise formula.

This could include a higher price for ethanol produced from B-heavy and C-heavy molasses and also allowing some portion of the ethanol to be produced from juice after augmenting sugar supplies in 2023-24. However, there won't be any rollback of the December 7 order that stopped production of ethanol from sugarcane juice and syrup for the 2023-24 supply year, which started in November, sources said.

The sugar companies are believed to have said that around 2.3 million tonnes (mt) of extra sugar will be added on to the supplies once around 1.7 mt is diverted for making ethanol in 2023-24. This is against the earlier planned 4 million tonnes due to the order. Therefore, from this 1.7 mt of sugar around 1.62 billion litres of ethanol can be procured by OMCs.

As a one-time waiver, sugar companies have demanded that of the 1.62 billion litres, they be allowed to make half (that is around 0.81 billion litres) from sugarcane juice as a one-time waiver of the December 7 order and the rest from B-heavy molasses.

That apart, the sugar companies have also demanded that as ethanol from sugarcane juice is banned, OMCs procure the ethanol produced from B- heavy molasses at a higher price at which it would have procured ethanol produced from juice.

And, ethanol produced from C-heavy molasses will be procured at a price at which OMCs would have bought ethanol produced from B- heavy in 2023-24 season. Ethanol is produced from multiple sources in India. It is largely through sugarcane- based molasses or grain-based and other sources as feedstocks. There is a different procurement price for ethanol produced from each source.

Meanwhile, CRISIL on Monday said that due to the decision of the Centre, sugar prices are expected to rise by a moderate 3-4 per cent 2023- 24 season (October to September) on- year, while the closing inventory  would surpass three months' consumption, ensuring adequate supply.  It also said that due to the decision, blending per cent of ethanol with petrol will remain below 10 per cent in supply year 2023-24 as against the projected 13-14 per cent.

Last week, after the decision to stop ethanol from sugarcane juice was made public, the sugar industry came out in the open against the move. National Federation of Cooperative Sugar Factories president Jaiprakash Dandegaonkar urged the Centre to reconsider its decision. The Indian Sugar Mills Association said because of the pause, the crushing capacity of sugar mills will come down drastically. It will lead to delay of the crushing season resulting in loss, not only to the mills but more importantly to the farmers. ISMA also suggested some alternative plans to the Centre.

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