With ethanol storage capacities brimming and liquidity nearing zero, sugar mills in Uttar Pradesh, especially those with distilleries, have been forced to look for new ways to tackle the situation following the lockdown imposed due to COVID-19 outbreak.
In an SOS call to oil marketing companies (OMCs), which have been unable to take ethanol supplies from the distilleries because of a steep drop in petrol consumption after the lockdown and their own storage tanks being full, representatives of distilleries have requested for reallocation of depots in other faraway states too.
“Some reallocations had already happened to neighbouring states on mutual agreement between the distillers and OMCs. But since the demand or tankage capacities in several of these reallocated depots in Madhya Pradesh, Jharkhand and West Bengal has already exhausted, we have requested the OMCs to check out depots in some other states like Gujarat, Rajasthan, Chhattisgarh, Assam, Odisha, Kerala, AP and Telangana,” said a distiller, adding that the OMCs also agreed to check the process of permissions in states like Assam and Odisha, which make zero ethanol blending as of now, and confirm how much ethanol they can take in those depots.
Sugar mills in UP are still crushing sugarcane, producing molasses and increasing ethanol production continuously, and will continue to do so for the next month or more. In order to keep their operations in full swing without interruptions, it is necessary that the off-take of ethanol is smooth so that their molasses and ethanol storage tanks don’t start overflowing.
Talking to FE on condition of anonymity, an official of the OMCs said that with the fall in crude price, ethanol has become costlier and if it has to be transported to faraway states, it adds to the cost. “It is best if we can consume the ethanol closer to the distilleries. But since that is not possible now, we are looking at options in states where blending has not been happening till now. But this would definitely incur additional freight charges,” he said. While the OMCs bear a fixed cost of the freight, distillers bear the remaining cost.
Asked to comment on this, UPSMA secretary-general Deepak Guptara said that though it will put an additional transport cost on the distillers, the reallocation will infuse the distillers with some liquidity and also help vacate their storage capacities.
“Also, exploring these uncharted areas is a new opportunity, as blending has not been done in most of these states, especially the north-eastern states,” he said. Interestingly, while all other states have been facing sugar and ethanol deficiencies due to a poor cane crop, UP has the maximum supplies of both. As on April 15, UP had produced over 400 lakh quintals of molasses.
What is important to note here is the fact that so far Uttar Pradesh has been doing a phenomenal job on the EBP. While the national average is below 5%, UP has been blending 9.7% as against the targeted 10%.