The Indian government has eased earlier restrictions banning the use of sugarcane juice or sugar syrup to produce ethanol.
A government directive issued on 15 December said that oil marketing companies (OMCs) will issue to each distillery a revised allocation of sugarcane juice and B heavy molasses-based ethanol for the November 2023-October 2024 supply year. The OMCs will then inform the government after placements of the revised contracts.
The government has allowed up to 1.7mn t of sugar to be "diverted" for ethanol production as it does not want to disrupt its ethanol blending programme, industry sources said. This figure is based on the quantity of sugar that could have been produced from the same quantity of sugarcane diverted towards ethanol production. Ethanol is produced from molasses, which is a by-product of sugar, or sugarcane juice or syrup. No volume allocations have emerged for molasses yet. All molasses-based distilleries will also endeavour to make ethanol from C heavy molasses, according to the directive.
A sharp rise in sugar prices in India this year prompted the government to issue a directive on 7 December asking sugar mills and distilleries to halt the use of sugarcane juice or sugar syrup to produce ethanol during the current supply year. The Fair and Remunerative Price for sugarcane in the 2023-24 sugar season was set at 315 rupees/quintal ($3.80/100kg), the highest levels since the 2009-10 season.
The government had allowed sugar mills to produce ethanol from B-heavy molasses to meet gasoline blending requirements.
Insufficient rainfall in key growing areas have raised worries of lower output of the sweetener and pushed prices higher in India.
India plans to increase ethanol blending in gasoline from 10pc currently to 15pc by 2024 and 20pc by 2025, as part of its efforts to reduce the country's dependence on crude imports. Fuel retailers buy ethanol from ethanol producers like sugar mills and distilleries to blend with gasoline.
