Ethanol Price Hike Beneficial To Both Sugar Industry, Farmers, Says Industry Leaders

Industry leaders have welcomed a media report stating that the government may hike the price of ethanol by November, as it would be beneficial to both the sugar industry and farmers.

The government is considering a proposal to increase ethanol prices for the season starting November 2024 while also pushing for diversification of feedstocks, as it aims to achieve the 20% blending target by 2025–26, PTI reported, quoting sources.

Ethanol, when blended with petrol, reduces greenhouse gas emissions, improves air quality, and supports the agricultural sector.

"As and when it gets announced, it will definitely be positive for the industry. If this news is true, then this will help the company as a whole. It will be good not only for the industry but for the farmers as well," Atul Chaturvedi, executive chairman of Shree Renuka Sugars, told NDTV Profit.

"The sugar-ethanol price has not been revised for almost a year now," Chaturvedi said. He emphasised that the industry has been advocating for this increase to support the government's ambitious blending targets. "Additional capacity for ethanol production already exists. The industry will be more than happy to make sure that the goals of the government are met," he said.

Chaturvedi also called for the lifting of a ban imposed in December 2023 on producing ethanol from sugarcane juice and molasses, as it would further enhance production capabilities and help achieve the blending targets.

"It's high time that the price (hikes) are announced... Though delayed, I think it is a welcome step. We are looking forward to the announcement," said M. Manickam, chairman and managing director of Sakthi Sugars. "The cost of producing ethanol is increasing because the government is raising the minimum support price," he told NDTV Profit.

He stated that there is no link between the MSP and raw material prices for sugarcane production. "In fact, they should make it automatic that every time they increase the sugarcane price, the sugar and ethanol prices should also be increased, but we find both of them are not linked," he said.

"Margin-wise, there’s not much difference between producing sugar, alcohol, and power in terms of profitability. I think it will be marginal in terms of cash flow," Manickam said.

However, he emphasised that increased ethanol production would be beneficial, as it would utilise existing capacity and help farmers liquidate their crops.

"So if ethanol production increases, and that is going out to the market through oil companies, the cash flow will come to the sugar companies, and we will be able to pay the farmers back," Manickam said.

"The industry can do a lot more to support government policy, but the only thing is that the pricing has to be appropriate. If they give the product price based on the raw material price, we can produce as much ethanol as required, and the farmers will increase cane growth," he further shared.