Govt sops fuel distilleries’ plan to revive idle capacities

Barely a week after a sharp increase in ethanol procurement price, sugar mills have started approaching lenders to source working capital to revive their idle distillation capacities.

The total ethanol production capacity in the country stands at 2,750 million litres.

According to the Indian Sugar Mills Association (ISMA), the apex body of the sugar industry, nearly a fourth of around 530 existing sugar mills have offered 2,002 million litres of ethanol to oil marketing companies (OMCs) against the requirement of 3,136 million litres. This is for 10 per cent blending with petrol.

Of the quantity offered, OMCs led by Bharat Petroleum Corporation Ltd (BPCL) finalised tenders to procure 1,635 million litres for the supply season of 2017-18 and lifted only 1,133 million litres as of September 10.

Apart from that, independent distilleries have also participated in the ethanol supply tender of OMCs. These distilleries produce the green fuel from other sources, including grains. But nearly 27 per cent of the installed capacity remained unutilised at sugar mills.

“With the government’s focus on increasing ethanol supply, sugar mills would try to exploit their full potential this year. Many distilleries have started working on raising working capital to start factories early. I am expecting that at least 500 million litres of new capacity will come this year,” said Atul Chaturvedi, vice-chairman, Shree Renuka Sugars.

Forecasting a bumper cane output at a record 35.5 million tonnes of sugar for the 2018-19 season beginning October 1, the government had in June announced ~44.40 billion of incentives, including ~13.32 billion of interest subvention for five years.

Considering the incentives to be insufficient to bail out existing distilleries and attract fresh investment, the government raised ethanol prices in September.

The Cabinet Committee on Economic Affairs (CCEA) raised procurement price of ethanol (from 100 per cent sugarcane juice) to ~59.13 a litre from the existing ~47.13 a litre.

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