India Lifts Restrictions on Ethanol Production: Boost for Sugar Industry
New Delhi, August 30: The Indian government has lifted restrictions on ethanol production from B-heavy and C-heavy molasses and sugarcane juice, which is expected to normalize ethanol production volumes for sugar companies. This decision was announced by the food department on Thursday.
Mumbai-based financial advisory firm DAM Capital stated that this move will lead to strong earnings growth for sugar mills from the third quarter of the fiscal year 2025. The firm is optimistic about the sugar industry and has assigned higher earnings multiples to companies within its coverage.
The food department, in collaboration with the petroleum and natural gas ministry, regularly reviews the diversion of sugar to ethanol production to ensure sufficient sugar availability for domestic consumption. DAM Capital noted that sugar inventory levels are expected to be above 8 million tonnes by October, exceeding the minimum requirement of 5 million tonnes. Gross sugar production is projected to remain at 32 million tonnes, higher than the consumption of 29 million tonnes.
This surplus will allow for the production of ethanol from B-heavy molasses and sugarcane juice. DAM Capital estimates that 4-5 million tonnes of sugar will be diverted towards ethanol production, sufficient for 4.5 to 5.0 billion liters of ethanol.
Another significant decision by the food department is to allow ethanol distilleries to participate in the Food Corporation of India (FCI) rice auction, with a maximum of 23 lakh tonnes of rice available for lifting. This move is expected to support the ethanol blending program for the 2024-25 season.
The government’s target of achieving 20% ethanol-blended petrol by 2024-25 and 30% by 2029-30 is likely to receive a boost from these policy changes. Ethanol from cane juice accounts for 25-30% of the total ethanol produced in India, while B-heavy molasses contributes over 60-65%. The rest comes from C-heavy molasses and grains.
The E20 blending in petrol was introduced to reduce oil import costs, enhance energy security, lower carbon emissions, and improve air quality. The government has advanced the E20 fuel target from 2030 to 2025.
At the COP26 summit in Glasgow in 2021, Prime Minister Narendra Modi committed to a five-part ‘Panchamrit’ pledge, which includes reaching 500 GW of non-fossil electricity capacity, generating half of all energy requirements from renewables, and reducing emissions by 1 billion metric tonnes by 2030. India also aims to reduce the emissions intensity of GDP by 45% and achieve net-zero emissions by 2070.
Doubts Revealed
Ethanol -: Ethanol is a type of alcohol that can be used as fuel for vehicles. It is often made from plants like sugarcane.
B-heavy and C-heavy molasses -: B-heavy and C-heavy molasses are by-products from making sugar. They contain different amounts of sugar and can be used to make ethanol.
Sugarcane juice -: Sugarcane juice is the liquid extracted from sugarcane. It can be used to make sugar or ethanol.
DAM Capital -: DAM Capital is a company that gives advice on money and investments. They predict how well businesses will do in the future.
Q3FY25 -: Q3FY25 means the third quarter of the financial year 2025. In India, the financial year starts in April and ends in March.
FCI rice auctions -: FCI stands for Food Corporation of India. They store and sell rice, and an auction is a way to sell things to the highest bidder.
Ethanol-blended petrol -: Ethanol-blended petrol is regular petrol mixed with ethanol. This helps reduce pollution and the need to buy oil from other countries.
Carbon emissions -: Carbon emissions are gases released when we burn fuels like petrol. These gases can harm the environment and contribute to global warming.
