Sugar Policy Shift To Sweeten Supply Scene For Uttar Pradesh Liquor Makers

Liquor producers in Uttar Pradesh are likely to see a boost, with sugar mills and distilleries getting authorisation to produce rectified spirit and extra neutral alcohol from sugarcane juice and B-Heavy molasses.

"Supply of raw material to liquor companies will definitely improve so it would be positive to these companies. For portable alcohol brands...Uttar Pradesh is diverting a lot for country liquor and I would say the impact of the order would be much more positive for whisky brands and Indian-made foreign liquor brand," said Atul Chaturvedi, executive chairman of Shree Renuka Sugars Ltd.

Uttar Pradesh, a key player in India's sugarcane and alcohol production, is set to benefit notably from the Department of Food and Public Distribution's latest policy shift. The previous ban was intended to mitigate potential sugarcane shortages. However, the recent policy shift has included Rectified Spirit and Extra Neutral Alcohol production, Chaturvedi pointed out.

The current distilling infrastructure, which boasts a capacity of over 16 billion liters, is adequate to meet the increased production demands, he said. The government's recent approval to divert 2.3 million tonnes of rice to ethanol production further supports this capacity. Therefore, while there is no immediate need for infrastructure expansion, the policy change is expected to enhance capacity utilisation within the existing framework.

Although the production of RS and ENA will not dramatically alter overall revenue, the policy is likely to improve capacity utilisation within the sugar sector. Chaturvedi indicated that ethanol contribution from the sugar sector, which had dropped to 46% due to the previous restrictions, is expected to rise to 65-70%. This adjustment will help rebalance ethanol supplies between the sugar and grain sectors, which are currently distributing 44% and 56% of ethanol, respectively.

The policy change is particularly advantageous for liquor manufacturers in Uttar Pradesh. The increased availability of raw materials is expected to bolster production capabilities for portable alcohol brands and improve supply for whisky and Indian-made foreign liquor brands. This shift is anticipated to positively impact these sectors by ensuring a steady ethanol supply.

Favourable monsoon conditions have positively impacted sugarcane crops across key regions, including Uttar Pradesh and Maharashtra, Chaturvedi noted. The ample rainfall has contributed to a promising harvest, supporting the overall health of the sugar industry.