Centre directs sugar mills with long term solution to tackle issue of excessive sugar stocks & cane arrears


Excess availability of sugar in the country which has been continuously depressing the sugar prices in India adversely affecting the realization on sale of sugar, thereby affecting liquidity of sugar mills, resulting in accumulation of cane prices arrears of farmers. In the face of various measures in sugar seasons 2017-18 and 2018-19 and current sugar season 2019-2020, sugar millers are still piled with cane arrears, to tackle the issues the Centre has directed sugar mills with a long term solution.

In a notification issued on 13th August 2020, The Department of Food and Public Distribution (DFPD) with a view to improve liquidity position of sugar mills, to enable them to clear cane price dues of farmers and combat the problem of excessive sugar stocks, has directed sugar mills across the country to divert excess sugarcane to produce fuel-grade ethanol by utilizing at least 85% of their existing capacity. DFPD has also set a mill wise target to produce 3.62 billion litres of ethanol in the year 2020-2021, the current capacity stands at 4.26 billion litres in an average of 282 days of operation.

With a view to encourage sugar mills to divert excess sugarcane to produce ethanol for blending with petrol, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar; and has also fixed the remunerative ex-mill price of ethanol derived from C-heavy molasses @ Rs.43.75/litre; from B-heavy molasses @ Rs.54.27/ litre and @ Rs.59.48/litre for ethanol derived from sugarcane juice/ sugar/ sugar syrup for ethanol season 2019-20 (December – November)

Further, to support sugar sector and to encourage sugar mills to divert excess sugarcane to produce ethanol in the interest of sugarcane farmers and sugar industry, soft loans of about Rs.18,600 crores are being extended through banks to 362 projects (349 sugar mills and 13 molasses-based standalone distilleries) for enhancement and augmentation of ethanol production capacity, for which an interest subvention of about Rs.4045 crore for five years is being borne by the Government. Out of 349 sugar mills that have been granted in -principle approval by DFPD, so far, loans have been sanctioned to 64 project proponents & completion of these projects would increase ethanol distillation capacity by 165 cr ltrs.

The Government has fixed a 10% blending target for mixing ethanol with petrol by the year 2022 and 20% blending target by 2030. During the last ethanol supply year 2018-19, about 180 cr litres of ethanol was supplied by sugar mills to OMCs, thereby achieving a 5% blending target. There is enough demand of ethanol by OMCs; and as remunerative prices of ethanol are being fixed by Government, therefore, sugar mills may not have any problem in diversion of excess sugarcane & mills can supply more ethanol produced from B-Heavy molasses & sugarcane juice/ sugar syrup, apart from ethanol produced from C-heavy molasses. It may also be kept in mind that, the revenue from production and supply of ethanol to OMCs is realised by mills / distilleries within 3 weeks of supply; whereas, revenue from sale of sugar produced is realised in 12-15 months. Thus, diverting sugarcane to ethanol would improve cash flows of sugar mills and would facilitate them to make timely payment of cane dues of farmers.

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