Sugar industry at crossroad as grain-based ethanol supply looks to take off

Indian Express

02-06-2025

Ethanol, once touted to be the saviour of the sugar industry in times of excess production, is fast losing its sheen as grain-based ethanol production threatens to over turn the apple cart. Lower than expected returns, have seen many sugar millers — who had invested heavily in infrastructure for production of ethanol — wean away from producing the fuel additive and instead produce sugar.
A press statement issued by Harshwardhan Patil, the president of the National Cooperative Sugar Factories Association, stated that the present price at which oil marketing companies procure ethanol from the sugar mills is not economical. 'Although there is potential to divert up to 40 lakh metric tonnes (LMT) of sugar into ethanol this year, only 32 LMTs are expected to be diverted. This shortfall is due to the gap between ethanol prices and the better returns from selling sugar directly in the domestic market. As a result, India's ethanol production capacity of 952 crore litres per year—including 130 crore litres from multi-feed distilleries—is being underused,' he said.
In order to help sugar mills avoid overproduction of sugar, the central government had unveiled the Ethanol Blending Programme (EBP) in 2017-18. Under the programme, the sugar mills were encouraged to produce ethanol instead of just producing sugar. Marketing companies were to buy ethanol with highest price being paid for ethanol that is produced from sugarcane juice or sugar syrup. The idea behind the programme was to allow mills another source of income and avoid glutting in the sugar market. Along with sugar mills, ethanol was also being produced from food grains as well as maize.
Patil in his report stated that the latter has been increasing with sugar mills falling behind. Thus for the ethanol supply year (December to November) 2024-25 sugar based feed stock produced 250 crore litres of ethanol while grain based feed stock produced 650 crore liters of the fuel additive. Infact, the contribution of grain based feed stock has been rising from 0 in 2017-18 to the present figures.
'In the Sugar Year (SY) 2022–23, the sugar industry reached a significant milestone by diverting 43 lakh tonnes of sugar towards ethanol production. This enabled the supply of 369 crore litres of ethanol, which accounted for an impressive 73% of the total ethanol blended with fuel across the country. However, in SY 2023–24, ethanol supply from sugar-based feedstocks declined to 270 crore litres, contributing only 38% to the national blending programme. This downward trend is projected to continue in SY 2024–25, with supply expected to fall further to 250 crore litres, making up just 28% of the total blending target of 900 crore litres,' he said.
In view of the problems being faced by the industry, Patil has urged the government to increase the procurement cost of ethanol to reflect the rising cost of sugarcane, maize etc, as well allow for more than 20 per cent blending in petrol.