Price and coverage push: Ethanol cheaper than petrol, candy spot for sugar trade

Petrol at Rs 90-plus per litre is pinching shopper pockets. But for Indian sugar mills, it has opened up alternatives – and a manner out of the issue of cane cost 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 many of the sugar has been extracted and crystallised.
The stability provide can be ethanol from fermentation of complete sugarcane juice (42.2 crore litres) and the intermediate ‘B-heavy’ stage molasses (181 crore litres).
Mills will 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 traditional ‘C’ molasses route (Rs 45.69/litre).
The whole projected ethanol purchases by OMCs in 2020-21 can be price practically Rs 15,800 crore.
Significantly, the Rs 62.65/litre ex-mill fee for ethanol from cane juice is manner under the Rs 91.17/litre retail value of petrol in Delhi. The distinction is especially resulting from taxes: Petrol attracts a Central excise obligation 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 trade supply.
Ethanol, a biofuel, might be combined with petrol to type totally 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 number 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’t 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 never 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 coverage has been a game-changer, based on Roshan Lal Tamak, govt director & CEO (sugar enterprise), DCM Shriram Ltd.
His firm, 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 sometimes crush cane with 13.5-14% whole fermentable sugars (TFS) content material.
From each tonne of cane, they will 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 will 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 choice is to not make any sugar and ferment your 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 via 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 consists of 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.