UP sugar mills plead for decontrol of molasses
Uttar Pradesh, the country’s largest sugarcane and sugar producer, is unlikely to optimally capitalise on the recent ethanol price hike, unless the state government decontrols the sale of molasses.
Recently, the Centre announced a rise in the ex-mill price of ethanol derived out of ‘C’ heavy (final) molasses by almost ~3 a litre to ~43.7 a litre for the next contract period, starting December 2018. Beside, for the first time, the Centre had decided to encourage production of ethanol for blending with petrol directly from sugarcane juice and ‘B’ heavy molasses by fixing a higher price of almost ~4 a litre above the price of ethanol made from ‘C’ heavy molasses.
According to estimates, with five per cent mandatory blending requiring 1.6 billion litres of ethanol, its makers could get an additional ~4.8 billion in the next crushing season.
However, despite a market glut and record sugar production translating into record molasses production and unsold inventory, the latter is a highly regulated commodity in UP.
In the current season, 2017-18, production of molasses was 5.32 million tonnes (mt). However, only 2.97 mt was lifted, leaving unsold stock of almost 2.55 mt with mills (total stock includes opening stock from the previous sugar season). The unsold stock also comprises 0.43 mt of reserved stock, not lifted by the state's countrymade liquor manufacturers till May, official data showed. UP Sugar Mills Association (UPSMA) claimed this was due to ‘excessive reservation’, much more than actual requirement; yet, they complained, the government had not relaxed the norms.
In the backdrop of the central government announcement to incentivise ethanol production for mixing in fuel, to partly rescue the beleaguered sugar sector from a liquidity crunch and mounting payment dues to cane farmers, UP-based companies would be able to benefit only when they could sell their stock without control.
UPSMA has petitioned the state government to decontrol molasses and encourage its sale to other states, since mills' storage capacity is full. It has urged the state to promote the production and usage of ethanol, to keep molasses' stock in check. It says there is enough demand for molasses in other states and also abroad but all these are subject to permission from the state, both ‘uncertain and time consuming’.
“We would review the emerging situation soon and take a call accordingly in the interests all stakeholders,” a senior state government official told Business Standard.
The industry says mills need to improve their liquidity by fast liquidation of its stock, by removing the restriction on sale of molasses to other states or abroad; also, abolishing the system of reservation for liquor manufacturers.
In the current season, 2017-18, production of molasses was 5.32 million tonnes. However, only 2.97 mt was lifted, leaving unsold stock of almost 2.55 mt with mills (total stock includes opening stock from the previous sugar season)