Ethanol Procurement Crisis Plunges Sugar Industry into Uncertainty
The sugar industry is facing a severe crisis following a sharp decline in ethanol procurement from sugarcane-based distilleries across India. According to recent data from the National Federation of Cooperative Sugar Mills (NFCSM), oil marketing companies (OMCs) have allocated a procurement quota of just 289 crore litres for sugarcane-based ethanol for the upcoming cycle.
Massive Capacity Left Unutilized
This allocation represents only a fraction of the industry's total production capacity of 838 crore litres, leaving a staggering 549 crore litres of production potential completely unutilized. The federation has highlighted a dramatic policy shift that has occurred since the inception of the Ethanol Blending Programme (EBP).
The share of sugarcane-based ethanol in OMC procurement has plummeted from 90% to just 28% as of February 15, marking a significant departure from previous years when sugarcane distilleries dominated ethanol production.
Shift Toward Grain-Based Distilleries
OMCs are increasingly prioritizing grain-based distilleries, which have been offered a substantial quota of 759 crore litres out of a total allocation of 1,048 crore litres for the upcoming procurement cycle. This represents a major strategic shift that has caught the sugar industry off guard.
Harshwardhan Patil, President of the NFCSM, emphasized that the industry had invested nearly Rs 1 lakh crore in ethanol expansion based on government assurances, with half of this investment coming from Maharashtra alone.
"The government initially assured us they would buy 70% of our ethanol. However, sudden restrictions on exports and the shift toward grain-based fuel have left mills in a precarious position," Patil stated. "We are not against grain-based ethanol, but the government must ensure at least 50% parity for sugarcane distilleries to keep the industry afloat."
Compounding Factors Deepen Crisis
The ethanol procurement crisis is compounded by stagnant domestic sugar consumption, which has hovered around 280 lakh metric tonnes for several consecutive years. With per capita sugar consumption showing a declining trend across the country, ethanol production has been viewed as the only viable way to ensure "handsome returns" for the approximately five crore families involved in sugarcane farming throughout India.
Currently, even the reduced quotas allocated to sugarcane distilleries are not being fully met. Of the 289 crore litres earmarked for sugarcane-based ethanol, OMCs have procured only 88 crore litres so far, leaving a significant gap between allocation and actual procurement.
"The crushing season is nearing its end, and mills are sitting on massive unsold stocks of ethanol produced from sugarcane juice," Patil added, highlighting the immediate financial pressure facing sugar mills.
Industry Demands Immediate Government Intervention
To resolve the deadlock, the federation has urgently appealed to the central government to implement several key measures:
- Allow ethanol exports to create alternative markets for surplus production
- Increase the procurement price for sugarcane-based ethanol to make it more competitive
- Mandate a 50-50 procurement ratio between grain and sugarcane feedstocks to ensure fair market access
The sugar industry's future now hangs in the balance as stakeholders await government action to address what has become a critical economic and agricultural challenge affecting millions of farmers and industry workers nationwide.
