India shifts focus from ethanol to sugar production amid supply concerns 

In a bid to secure ample supplies of sugar amid concerns of a potential fall in production due to below-normal rainfall in key growing states, India is contemplating measures to discourage the diversion of sugar for ethanol production, according to government and trade sources cited by Reuters. 

The move aims to boost sugar output and may involve urging mills not to use sugar cane juice and B-heavy molasses (contains less sugar and does not spontaneously crystallise) for ethanol production. The decision comes as a response to the demand-supply situation, with the government intending to prioritise sugar production in the current marketing year, which commenced on November 1. The potential shift is seen as a setback for an industry that has made significant investments in increasing ethanol production capacity over the last five years. 

Government sources, speaking on condition of anonymity, indicated that the authorities could specifically allow mills to produce ethanol only from C-heavy molasses, a cane by-product with minimal sugar content.  

This decision aligns with the government’s focus on addressing the challenges posed by patchy rains in Maharashtra and Karnataka, key sugar cane-growing states, raising concerns about the potential decline in sugar output for the 2023-24 marketing year. The Indian Sugar Mills Association has already projected an 8 per cent drop in sugar production, estimating it at 33.7 million metric tons.  

Ethanol procurement guidelines for the ongoing marketing year are expected to be finalised soon, with oil marketing companies likely to honour contracts already awarded. The government’s decision to prioritise sugar production is seen as a short-term setback by industry insiders, who hope for a shift in focus back to ethanol once sugar cane supplies improve. 

India’s fuel retailers, who blend ethanol with gasoline, have been paying higher prices for ethanol produced from sugar cane juice and B-heavy molasses. The potential restriction on using these sources for ethanol production could impact the economics of the industry. 

Local sugar prices have already surged to their highest levels in nearly 14 years. 

(With inputs from Reuters) 

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