In a significant policy development that aims to enhance ethanol production and support sustainable energy initiatives, the Union government of India has allowed sugar mills to utilise cane juice and syrup for ethanol production for the upcoming 'ethanol supply year' (ESY) 2024-25, starting 1 November 2024. This change, which was officially announced in a notification on 29 August 2024, marks the removal of the previous cap on sugar diversion specifically for ethanol production.
On the National Stock Exchange (NSE), key sugar companies experienced upward movements in their stock prices, with Balrampur Chini (+3.43%), Dalmia Bharat Sugar (+2.46%), Shree Renuka Sugar (+5.40%), and Triveni Engineering (+8.60%) . Other notable increases were observed in the shares of EID Parry (+1.74%),Globus Spirits (+19.12%) and Bajaj Hindusthan (+4.94%), contributing to a positive market sentiment.
Under the new guidelines, sugar mills and distilleries are now permitted to produce ethanol not only from cane juice and syrup but also from B-heavy and C-heavy molasses. The ministry of consumer affairs, food and public distribution emphasised that this policy adjustment aligns with the government's objectives of increasing renewable energy usage and reducing reliance on fossil fuels. The ministry stated, "Sugar mills and distilleries are allowed to produce ethanol from sugarcane juice/sugar syrup, B-heavy molasses, as well as C-heavy molasses during ESY 2024-25 as per the agreement with OMCs."
In a complementary initiative, the government has sanctioned the purchase of up to 2.3mn (million) metric tonnes of rice from the Food Corporation of India (FCI) by ethanol distilleries. This decision is aimed at strengthening ethanol output while supporting the broader strategy of fuel blending. FCI will conduct e-auctions from August to October 2024, allowing ethanol producers to acquire rice and manage surplus stocks which currently exceed 54mn tonnes.
The conditions for purchasing rice include allocation of ethanol to the respective distilleries by oil marketing companies (OMCs), and a commitment that no more than 230,000 tonnes may be lifted for ethanol production.
To mitigate potential disruptions in domestic sugar availability, the department of food and public distribution (DFPD) and the ministry of petroleum and natural gas (MoPNG) will monitor the diversion of sugar for ethanol production. The two ministries will conduct periodic reviews to ensure that domestic sugar supply remains stable throughout the year. “DFPD, in coordination with the MoPNG, shall periodically review the diversion of sugar to ethanol production vis-a-vis the production of sugar in the country,” the ministry stated, emphasising the need to maintain year-round sugar availability for domestic consumption.
This policy shift is part of the government's ongoing efforts to boost ethanol production and promote sustainability in energy practices. Also the recent fire incidents in Brazil's leading sugar-producing state, São Paulo, have created export opportunities for Indian sugar companies. With approximately 2,000 fires affecting around 60,000 hectares of sugarcane plantations, industry group Orplana reports significant disruption. Analysts from Green Pool Commodity Specialists estimate that the fires could result in a loss of up to 5mn metric tonnes of sugarcane. As international sugar prices surge amid concerns about Brazil's sugar supply, the Indian sugar industry is seizing this moment to urge the government to permit sugar exports, potentially benefiting local exporters.
