MUMBAI/NEW DELHI – India is considering imposing restrictions on the amount of sugarcane diverted for ethanol production in the upcoming season, beginning in October, in an effort to boost sugar output and mitigate record-high prices. This information comes from two government and two industry sources, who requested anonymity as the deliberations are not yet public.
Concerns about next year’s sugar output have intensified due to reduced rainfall in Maharashtra and Karnataka, India’s leading sugarcane-producing states. By prioritizing sugar supplies over ethanol, India aims to increase domestic availability and potentially avoid sugar imports, especially as production is anticipated to decline. A decision on this matter is expected by the end of next month. A government spokesperson has not yet responded to a request for comment.
During the current year, ending in September, mills diverted approximately 3 million metric tons of sugar, representing about 10% of total output, to ethanol production. Restricting this diversion in the next season could add a similar volume to domestic sugar supplies, thereby compensating for the expected drop in output caused by the weak rains in key cane-growing regions.
Indian sugar prices have climbed by about 10% in the past month, reaching a new record. These high prices are projected to persist for at least the next three months as supplies tighten and demand escalates during the Indian festival season, a period marked by increased travel.
To maintain its program of blending 20% ethanol into petrol, the government would need to increase the use of corn and rice for ethanol production to offset the reduction from sugarcane. Fortunately, corn and rice stocks are currently ample.
Sources with direct knowledge of the matter stated that mills would be instructed to cease producing ethanol from sugarcane juice and B-heavy molasses, a byproduct with a relatively high sugar content. Instead, mills would primarily be permitted to produce ethanol from C-heavy molasses, which is the byproduct remaining after most of the sugar has been extracted.
The ethanol allocation for the sugar industry for the marketing year commencing in November is anticipated to be finalized before the season begins. Following this, state fuel retailers will issue tenders for ethanol purchases.
New Delhi has already implemented a ban on sugar exports and, last month, imposed limits on the stock that dealers can hold. Industry officials believe that these proposed new curbs are unlikely to significantly harm the sugar industry, as mills are expected to generate greater profits from producing and selling sugar than from diverting sugarcane for ethanol.
