Increase in ethanol production would improve credit profile of sugar mills

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Mumbai: The increased distillery capacity and improved inventory position are likely to improve the credit profile of integrated sugar mills in 2022-23, said a report by ICRA.

Sabyasachi Majumdar, ICRA Senior Vice-President and Group Head said,
“The resultant ramp-up of ethanol supplies augurs well for the credit profile. We expect reduced inventory levels and thereby lowering borrowings and interest costs, this would meaningfully bolster the credit metrics of the sector from FY23.”

The government has undertaken several supply and demand side interventions since 2014 which has enabled improvement in ethanol blending from average 1.53% during Ethanol Supply Year (ESY) 2013-14 to 7.93% during ongoing ESY 2020-21 as on July 12, 2021.

According to the Indian Sugar Mills Association (ISMA), in the current season, till 5th July, 2021, the total contracted quantity of ethanol is 333 crore litres. Ethanol manufactured from sugarcane juice and B-Heavy molasses(BHM) is expected to be 230 crore litres, which translates into diversion of around 21 lakh tonnes of sugar into ethanol.

Around 450 crore litres of ethanol would be required to meet the target of 10% ethanol blending with petrol during next season which is around 117 crore litres more than the 2020-21 season. It will translate into the diversion of another about 13 lakh tonnes of sugar as compared to the previous year. Thus a total of 34 lakh tonnes of sugar will be converted into ethanol next season.

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