Ethanol scenario in India for 2019 -20
The quantity of ethanol sugar companies offered in the first tender for the 2019-20 marketing season was lower than what oil marketing companies (OMCs) had sought, thanks to a production drop and prospects of better prices from other sources. But, even if they had offered their full capacity, they would not have met the need, as OMCs’ original requirement itself exceeded the installed capacity of sugar mills by 40 per cent. While the oil companies placed tenders for 5.11 billion litres of ethanol in 2019-20, sugar mills have a total installed capacity, from all sources, of only 3.55 billion litres.
In the first tender for 2019-20, sugar companies offered 1.63 billion litres of ethanol, 13.29 per cent less than in 2018-19 season, as sugarcane output dropped and portable alcohol manufactures offered better prices. Ethanol delivery season starts from December and ends in November.
According to sources, OMCs are expecting a surge in ethanol production from non-sugarcane sources in the coming season, so their ethanol requirement exceeds the sugar firms’ entire installed capacity to produce ethanol. They are also confident that their doping target for the year won’t have to be cut drastically due to lower ethanol availability from sugarcane-based sources.
“Apart from molasses, sugarcane juice, rotten and surplus grains are also allowed to be converted to ethanol. Enhanced capacity utilisation and creation of already licensed new facilities are given additional thrust. Substantial quantities of ethanol will come from this,” said Y B Ramakrishna, chairman, working group on biofuels of the ministry of petroleum and natural gas.
State-run Indian Oil Corporation (IOC) is the country’s top buyer of ethanol from all sources with 45 per cent market share, followed by Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL).
So far, bulk of the ethanol, over 80 per cent, is being produced from sugarcane-based molasses, but government in the coming year expects significant quantities of the same to come from non-sugarcane sources like wheat and corn, a reason why OMCs have placed requirement which is among the highest in recent times.
Uttar Pradesh, Maharashtra and Karnataka account for bulk of the sugarcane-based ethanol produced in India.
However, experts say the transition from molasses-based ethanol to non-molasses based ones could be easier said than done, because in 2018-19 marketing season, out of the 2.45 billion litres of ethanol extracted, less than 10 per cent or just around 0.17 billion litres was from non-sugarcane sources, while the rest were all from sugarcane-based molasses.
In 2018-19, OMCs wanted 3.3 billion litres of ethanol of which 2.45 billion litres were extracted and so far 1.88 billion litres of ethanol has been supplied to OMCs.
In the current year, the situation is slightly better because officials said out of the total requirement of 5.11 billion litres, OMCs have already floated the first tender of 1.63 billion litres, of which 0.04 billion is from non-sugarcane sources such as wheat and corn, while the rest is from molasses.
“OMCs might also be shoring up their ethanol capacities from 15 days to 30 days which is why they require such huge quantities of the same or are planning to pre-pone the 10 per cent blending target from 2022,” a senior industry official said.
To increase their ethanol producing capacities from non-sugarcane based sources, OMCs have already lined-up plans to set up 12 second generation ethanol bio-refineries in 11 States.
Out of this, five locations namely Dahej (Gujarat), Panipat (Haryana), Bargarh (Odisha), Bina (Madhya Pradesh) and Bathinda (Punjab) are expected to be the first in line.
The Centre in March 2019 had cleared a soft-loan package of Rs 15,000 crore with an interest subsidy of Rs 3,355 crore to companies that are setting up distilleries for producing additional capacities as a part of the ethanol-blending programme. This was in addition to the Rs 1,332 crore interest subvention on soft loans by sugar mills that was announced in June 2018.
However, agency reports said that the soft-loan programme is moving at a very slow pace as banks have so far disbursed only about Rs 800 crore.
According to industry experts, only 5-6 per cent of the total soft-loan amount of Rs 15,000 crore announced under the scheme has been disbursed so far by banks.
Meanwhile, domestic sugar production in the ongoing 2019-20 crushing season (October to November) dropped by nearly 65 per cent to 485,000 tonnes as on November 15, due to delayed crushing in two major producing states of Maharashtra and Karnataka.
According to the Indian Sugar Mills Association (ISMA), sugar production stood at a much higher level of 1.34 million tonnes (MT) in the same period last year.
Quoting trade and port information, it said sugar mills had contracted for export of 1.4 mt sugar, of which 200,000 tonnes had been shipped.
The mills in Maharashtra are yet to start crushing because of floods and the consequent inundation this year.
Last year, 149 mills in the state were already operating and had produced 631,000 tonnes of the sweetener by this time. Floods affected Kolhapur, Sangli, Satara and Pune with prolonged inundation this year. As a result, the area under sugarcane in the state dropped 33% to 776,000 hectares, compared to 1.15 million hectares (MH) last year. Sugar production is pegged to drop 40% from 10 MT in 2018-19 to 6.2 MT in 2019-20.