Sugar prices likely to drop by Rs 100 per quintal after government’s decision to not use cane juice for ethanol production

Government in a notification released on December 7, 2023, directed to all sugar mills and distilleries not to use Sugarcane Juice/Sugar Syrup for Ethanol in ESY 2023-24 with immediate effect. Supply of ethanol from existing offers received by OMCs from B-Heavy molasses will continue. Following this decision, an increase in production is anticipated, likely leading to a decline in sugar prices.

Rahil Shaikh, Managing Director of MEIR Commodities, speaking to ChiniMandi said that the ethanol policy is lifeline for the sugar industry and there has been huge investment in it. To achieve the government’s 20% ethanol blending target, the sugar industry has invested huge to supply over 5 to 5.5 billion liters of ethanol. The decision by government marks a significant setback, considering in the first tender, our target was to supply 137 crore liters from Sugar Cane Juice/Sugar Syrup. Out of this, 12 or 14 crore liters would have been supplied. So around 120 crore liters got cancelled. This means approximately 1.6 million tonnes of sugar is back into the system.

Shaikh expressed dissatisfaction with the decision, citing the sufficient stock available for the domestic market. With an opening stock of around 50 lakh tonnes and an estimated production of 30 million tonnes (potentially reaching 31.5 million tonnes due to the decision), the return of 1.6 million tonnes of sugar is expected to impact prices. A reduction of ₹100 per quintal in sugar prices is anticipated within the next 15 days, impacting the capacity of sugar mills to pay Fair and Remunerative Price (FRP) to cane farmers.

It is worth mentioning that on Monday, the Centre informed the Rajya Sabha that the current ethanol production capacity in India is 1,364 crore liters, sufficient to meet the ethanol blending target.

In alignment with the Ethanol Roadmap, oil marketing companies have achieved a 10% ethanol blending target during the supply year 2021-22 and a 12% ethanol blending target during the supply year 2022-23.

The Roadmap for Ethanol Blending in India 2020-25, prepared by an inter-ministerial committee, estimated an ethanol requirement of 1,016 crore litres to achieve 20 per cent blending targets in ESY 2025-26. In line with the roadmap, oil marketing companies have achieved 10 per cent ethanol blending during 2021-22 and 12 per cent during 2022-23.


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