Іndian sugar industry concerned as ethanol allocation shifts toward grain

India’s sugar industry, which saw a significant boost from the ethanol blending program, is facing new challenges due to a policy shift. In recent years, the industry has invested heavily in creating new ethanol production capacities and increasing supplies to meet the growing demand for ethanol in the blending program. However, a change in feedstock priorities has left the sugar industry at risk of losing demand for its ethanol output.

According to industry representatives, the balance of feedstock for ethanol production has tilted in favor of grain, reducing the share of molasses. While the sugar industry once supplied around 70% of ethanol, this has dropped to about 30%, with the gap filled by grain-based distilleries. This shift negatively impacts ethanol revenues, timely payments to farmers, and the optimal utilization of the sugar industry’s production capacities.

Atul Chaturvedi, Executive Chairman of Shree Renuka Sugars, noted that Niti Aayog had envisioned a 55% ethanol contribution from the sugar sector and 45% from grain, based on which the industry heavily invested in infrastructure. He expressed concerns that limited ethanol quotas for the sugar industry could make it difficult to service loan interest, potentially driving the sector into financial distress. Chaturvedi urged the government to restore the original balance and, given the expected good sugarcane crop this year, increase the sugar sector’s quota to 55%.

Ankita Patil, Whole-time Director of Indreshwar Sugar Mills Limited, emphasized that ethanol has been a key margin stabilizer for sugar mills. She warned that continuing this trend could make the industry overly reliant on sugar, losing the economic diversification benefits ethanol provided. Patil added that declining molasses prices, reduced ethanol revenues, global price fluctuations, and underutilized infrastructure threaten the industry’s long-term sustainability, necessitating strategic planning and policy alignment.

Tags: grain, sugar, India, ethanol