NEW DELHI (Commoditiescontrol) - The government has notified a decision to allow sugar mills to manufacture ethanol directly from sugarcane juice or intermediate product called B-molasses.
The move would help mills divert cane juice for ethanol manufacturing during surplus years.
The sugarcane control order of 1966 has been amended in this regard and the same has been notified by the Union Food Ministry.
"When a sugar factory produces ethanol directly from sugarcane juice or B-molasses, the recovery rate in case of such factory shall be determined by considering every 600 litres so produced as equivalent to one tonne of production of sugar," the notification said.
According to ICRA, "The production of ethanol through B-grade molasses and sugarcane juice would support the sugar mills in producing ethanol from relatively higher sucrose content material. While the realisations from pure ethanol production are lower than the one obtained from sugar and ethanol as in conventional practise, this measure would allow the possibility of a reduction in sugar surpluses in the case of overproduction scenarios, thus indirectly supporting sugar prices."
Sugarcane-based ethanol can be produced by three different routes: (a) directly from sugarcane juice; (b) from B grade molasses; and (c) from C grade molasses. In the sugar-manufacturing process, sugar is crystallised from a concentrated juice in three separate stages.
At each stage, three different grades of sugar and molasses are produced. In the first stage of crystallisation, sugar derived from the concentrated juice is known as A grade sugar and the non-crystalline fraction is known as A grade molasses.
In the second stage of crystallisation, the A grade molasses is further processed to obtain B grade sugar and B grade molasses. Subsequently, B grade molasses is fed into the third stage of crystallisation to obtain C grade sugar and C grade molasses, which is not crystallised any further.
So far, mills were allowed to manufacture ethanol from by-product called C-molasses, after sugar was taken out while processing raw cane juice. Molasses is also used for manufacturing spirit and alcohol among other products.
Last month, the government for the first time also fixed the price of ethanol produced from intermediary or B-molasses at Rs 47.49 per litre for the marketing year starting December 2018. The price of ethanol produced from C-molasses has been raised by Rs 3 per litre to Rs 43.70 per litre.
A higher price for ethanol made from B-heavy molasses is likely to encourage sugar mills to divert more cane towards the green fuel, which may come handy for them in times of high supply and low prices.
If ethanol is produced from B-heavy molasses, mills would directly divert cane towards the production of the biofuel instead of sugar.
Diverting sugarcane juice for directly making ethanol is a very common practice across the world. In fact, almost all the ethanol produced in Brazil, the world’s largest sugar producer, is directly made from sugarcane juice. In contrast, in India, because of sugar shortage and prejudices associated with the diversion of a food crop for producing fuel, this wasn’t allowed for many years.
Mills in India, usually produce ethanol from C-heavy molasses, which is the end by-product or the leftover slurry after the extraction of sugar from cane juice. C-heavy molasses have about 50-52 percent sugar content, compared with 65 percent in B-heavy molasses.
According to industry estimates, if the entire 1.13 billion litres of ethanol was produced from B-heavy molasses instead of the current practice of producing it from C-heavy molasses, then sugar production would be approximately 11 million tonnes less because the former contains some amount of sugar in it as well.
This fall in sugar production could go up further if ethanol is produced directly from sugarcane juice. In other words, if all the existing sugar mills with distilleries had produced ethanol from B-heavy molasses and sugarcane juice, then India’s actual sugar production in 2017-18 could have been 10-11 million tonnes less — somewhere around 20-23 million tonnes, which is sufficient to meet domestic needs if opening and closing stocks are added.
This could have kept prices at reasonable levels, without letting them fall so sharply and leading to sugarcane dues of over Rs 220 billion accruing to farmers.
For producing ethanol from B-heavy molasses, officials said not much might be required in terms of additional investment as they are intermediary molasses produced, along with C-heavy molasses.
However, that’s not the case with producing ethanol directly from sugarcane juice. For this, officials said that setting up of a distillery having an average capacity of 40 kilo litres a day, which would require an additional investment of about Rs 2.5 million to Rs 5 million.
With the Indian sugar industry going through a difficult phase, it remains to be seen how much of these additional investments would actually materialise.
Recently, the government has also approved bank loans of Rs 4,440-crore for the sugar mills over a three-year period to augment their distillery capacities. It will also bear an interest subvention of around Rs 1,300 crore over a period of five years, including a moratorium period of one year.
The increase in the distillery capacities is likely to support the profitability from the by-products during surplus availability of cane and also help in diversion of sugar during the surplus phase to reduce the excess inventories.
India, which is over 80 percent dependent on imports to meet its oil needs, has mandated blending of up to 10 percent ethanol in petrol but inadequate availability has restricted this to under 4 percent.
Mills have contracted for supply of 158 crore litres of ethanol to oil marketing companies (OMCs) during the marketing year starting December 2018, higher than 78.6 crore litres listed by OMCs last year, as per the industry data.
OMCs procure ethanol from sugar mills for blending with petrol. Mills are expecting revenue realisation of over Rs 5,000 crore from sale of ethanol to OMCs during the 2017-18 sugar season (October-September).
Sugar mills are incurring losses as prices of sugar have fallen below production cost on account of record output of 32 million tonnes in 2017-18 season as against the annual domestic demand of 25 million tonnes.
(By Commoditiescontrol Bureau)
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