Ethanol blending rate could fall to less than 10% in ethanol supply year (ESY) 2023-24 (November 2023 to October 2024) against 12% in 2022-23, after government’s decision to restrict the use of sugarcane juice and sugar syrup for ethanol production, according to a report by CRISIL.
The government restricted the use of sugarcane juice and sugar syrup for ethanol production in ESY 2023-24, due to lower production of sugarcane on account of erratic rains.
However, supply of ethanol from existing offers received by oil marketing companies from B heavy molasses, C heavy molasses and grains will continue.
Production of sugarcane and sugar is projected to decline by around 9% and around 3%, respectively due to scanty rainfall seen in key sugarcane producing states of Maharashtra and Karnataka.
At the end of SS 2023 (in September 2023) closing inventories of sugar were adequate to meet just 2 months’ consumption as against the past 5-year average of 4 months’ consumption.
In October 2023, the government also extended restrictions on sugar exports beyond October 2024. In July, the Food Corporation of India stopped supplying rice for ethanol production amid supply concerns.
Sugar prices surged 7% and 5% in SS 2021-22 and SS 2022-23, respectively. By the end of SS 2022-23, sugar prices had crossed Rs 40 per kg in northern India, due to lower sugarcane availability and its increased diversion towards ethanol.
Closing inventory stood at 2 months’ consumption in SS 2022-23, versus an average of 4 months
in the last 5 years.
The government’s ambitious target of attaining 20% ethanol-blended petrol by EY 2024-25 and 30% by EY 2029-30 is likely to face setbacks due to the halt of ethanol production from sugarcane juice in EY 2023-24.
In EY 2022-23, a blending rate of 12% was achieved, and the industry had anticipated a rate of 13-15% in EY 2023-24.
