The government approved an increase in the price of ethanol to be procured by public sector oil marketing companies (OMCs) from sugar mills for blending with petrol for the 2019-20.

The Cabinet Committee on Economic Affairs (CCEA) also allowed conversion of old sugar into ethanol, which again is expected to help mills deal with the current overproduction in the sweetener and make timely payments to farmers for the cane delivered by them.

What is ethanol and how do mills produce it?

• Ethanol is basically alcohol of 99%-plus purity, which can be used for blending with petrol.
• The normal rectified spirit used for potable purposes has only 95% alcohol content.
• Both ethanol (also called anhydrous alcohol) and rectified spirit are produced mainly from molasses, a byproduct of sugar manufacture.
• From one ton of cane, mills can produce 115 kg of sugar (at 11.5% recovery) and 45 kg of molasses (18 kg TFS) that gives 10.8 litres of ethanol.
• But rather than produce sugar, mills can also ferment the entire cane. In that event, they would end up making 84 litres of ethanol and zero kg of sugar.

How is using ethanol becoming a solution?

• Given the surplus sugar production in the country, the government has allowed mills to produce ethanol from molasses and directly from sugarcane juice.
• CCEA approved even use of sugar and sugar syrup for production of ethanol; mills can simply add these to the molasses mother liquor for further fermentation.
• Currently, ex-factory prices of sugar are ruling at around Rs 32 per kg.
• But if it were to convert the entire cane juice into 84 liters of ethanol, the gross prices will be at around 48/litre.
• This is a huge incentive to produce ethanol. This has been additionally facilitated by the government mandating 10% blending of petrol with ethanol.
• If mills are able to divert more of cane juice for ethanol, it would mean producing less sugar.
• Since the country is producing too much sugar and is importing oil, the ethanol-blending programme is beneficial both for mills and for the country’s balance of payments.

Way ahead-

• Mills are expected to close the 2018-19 sugar season (October-September) with all-time-high stocks of 136 lakh tonnes (lt), which is equivalent to six months of domestic consumption.
• As of now, the sugar mills have outstanding cane dues of over Rs 10,000 crore, of which Rs 7,000 crore-plus is in UP alone.
• These will mount further as crushing for the 2019-20 season begins in a month’s time.

Ethanol is the only real savior under the circumstances — both for mills and cane growers.