As the Indian sugar industry officially enters the 2024-25 season, stakeholders are keenly hoping for smooth and uninterrupted operations. While most mills in major sugar-producing states like Uttar Pradesh, Maharashtra, and Karnataka have yet to commence crushing, they are expected to start soon.
The previous season, 2023-24, was marked by a series of ups and downs for the sugar and ethanol industry. As the new season begins, the industry will implement lessons learned from past challenges. Although many of the industry’s requests to the government—such as increasing ethanol prices, allowing sugar exports, and raising the minimum selling price (MSP) for sugar—have not yet been met, there remains optimism for a more favorable outcome this season.
Industry bodies deserve applause for tirelessly advocating for essential relaxations, which have resulted in significant relief measures. Notably, the government has permitted sugar mills and distilleries to produce ethanol from sugarcane juice, B-Heavy molasses, and C-Heavy molasses during the Ethanol Supply Year (ESY) 2024-25. Additionally, the government has lifted a previous ban and allowed the sale of up to 23 lakh tonnes of rice from Food Corporation of India (FCI) stocks to grain-based ethanol distilleries. Recently, the government also allowed sugar mills and distilleries to manufacture Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) from sugarcane juice and B-Heavy molasses.
The sugar industry in India claims that the cost of sugar production is high; therefore, the government should increase the sugar MSP accordingly. The industry has been stressing the widening gap between the cost of sugar production and the stagnant MSP for sugar for a long time. Despite rising production costs, the sugar MSP has remained unchanged since 2019, creating challenges for sugar producers. To address this disparity, the industry is urging the government to raise the sugar MSP. The government should take steps to increase the sugar MSP to minimum Rs. 36 to 37 to provide relief to millers in the new season, as it will not only help ensure the sustainability of the sugar industry but also support sugarcane farmers and facilitate clearing dues within 14 days of procurement.
The industry notes that the government has increased the Fair Remunerative Price (FRP) of sugarcane to Rs. 340 per quintal for the 2024-25 Sugar Season, marking a Rs. 25 increase. This notable rise will directly affect cane costs, which will, in turn, influence the costs of sugar production. Given that mills are required to pay for cane within 14 days of delivery, this presents a significant burden. It is essential to establish a formula that aligns the sugar MSP with the FRP of sugarcane. In the future, whenever the government hikes the sugarcane FRP, it should also take steps to increase the sugar MSP.
The new season is likely to be important, as the government may introduce a new sugar control order. In August 2024, the Ministry of Consumer Affairs, Food and Public Distribution released the draft of “The Sugar (Control) Order, 2024,” seeking suggestions from the industry. In response, various sugar organisations, including ChiniMandi and a committee of experts, submitted important recommendations and suggestions to the Government of India on behalf of sugar mills, sugar traders, and other stakeholders.
The 2023-24 season also witnessed encouraging developments, particularly regarding increased ethanol production capacity. Leading companies have ramped up their capacities, and this trend is expected to continue in the new season. The Department of Food & Public Distribution (DFPD) has reported its accomplishments in the first 100 days of the new government. The ethanol production capacity has expanded significantly, reaching 1,648 crore liters, achieving the target of increasing total capacity to 1,600 crore liters. The government’s initiatives have led to a steady increase in ethanol production capacity across the country, with several states now having more ethanol capacity than required. States such as Maharashtra, Karnataka, Uttar Pradesh, Punjab, Haryana, Sikkim, Bihar, and Madhya Pradesh have exceeded their ethanol production capacities, enhancing not only energy self-sufficiency but also empowering farmers. These states are also assisting smaller states with their ethanol supply needs.
The sugar industry is now calling on the government to revise ethanol procurement prices for various feedstocks, taking into account the fair and remunerative price (FRP) of sugarcane. An increase in these prices could not only boost ethanol production but also strengthen the financial stability of sugar mills, allowing them to settle cane dues more efficiently. Grain-based distilleries are also voicing concerns that current FCI rice and maize prices are not viable for ethanol production, necessitating an adjustment in pricing. With renewed optimism for the new season and the upcoming Ethanol Supply Year (ESY) 2024-25, industry stakeholders believe that the government will pay attention to their demands to address ongoing challenges. The government should take steps to increase ethanol prices by at least 10 percent, as this will help accelerate ethanol production.
The government’s Ethanol Blended with Petrol (EBP) Programme, aimed at achieving 20 percent ethanol blending with petrol by 2025, is making strides. Recent figures show that ethanol blending in petrol reached 15.8 percent in August, with cumulative blending from November 2023 to August 2024 at 13.6 percent. If the government can resolve current hurdles, the industry is confident it can meet the target. Additionally, reports suggest that the government is contemplating an equally significant step: blending up to 5 percent ethanol in diesel (ED-5). While this move has yet to receive official confirmation from the government, the potential benefits of such an initiative are substantial. If pursued, this could enhance environmental sustainability, reduce crude oil imports, and support the domestic ethanol industry. If the government proceeds with the ED-5 initiative, it will present a good opportunity for the industry as demand for biofuel increases.
As we look ahead, we hope that the new season will not only bring ample opportunities for the industry but also facilitate alignment with the government’s roadmap for energy self-sufficiency, sustainability, and improving farmers’ incomes.
For further inquiries or to contact Uppal Shah, Editor-in-Chief, please send an email to Uppal@chinimandi.com.
