Bombay: In an exclusive interview with ET Now, sugar industry experts were optimistic about the prospects for ethanol in India. The recent disclosure from the Department of Food and Public Distribution said that the total ethanol production capacity in the country has crossed over 910 crore liters. Production in the first 8.5 months of this season exceeded total ethanol production of a full 302 crore liters last season. India has an ethanol blend target of 20% by 2025, which roughly translates to Rs 1020 crore litres. OMC ethanol supplies in the country reached 313 crore liters till August 14.
Atul Chaturvedi, executive chairman of Shree Renuka Sugars, said the Indian sugar industry will move towards the Brazilian model. The company’s revenue from ethanol has grown from 10% to 40%. Heavy inventory and interest charges have been reduced and the cash flow of sugar companies has improved significantly thanks to the production of ethanol. He also said that in sugar-producing states, the blending ratio has broken through the 10% barrier. Overall sucrose production will be 47.5 million tonnes this season, of which 5 million tonnes will be diverted for ethanol.
PS Ravi, ED (Retail) BPCL said OMC has worked well on the supply side and has surplus ethanol production centers in UP, Maharashtra and Karnataka. The industry reached 10% blend 5 months ahead of target and expects production of Rs 1200 crore liters over the next two years. BPCL has already built up storage capacities across the country. The focus will be on building transfer logistics from ethanol-rich states to deficit states. The supply side has been fixed; you have to work on the demand side.
Aditya Jhunjhunwala, chairman of ISMA, said the industry is confident of reaching 20% ethanol in advance. The association asked the government. focus on flexi-fuel vehicle launches. The target of 100k tonnes of surplus sugar should be diverted to ethanol. The request to the government includes the need to have a better price differential for sugar and more price incentives need to be made for the diversion of cane sugar.
Analysts expect the sugar sector to be reassessed with help from the government’s push for biofuels, especially ethanol. Sugar companies shed the burden of the legacy of high working capital. Greater diversion from cane to ethanol will solve the problem of excess sugar inventories and improve OMC cash flow. Realign their business models with new high-growth, profitable and scalable trends. Ethanol demand is expected to grow at a CAGR of 15% in FY22.