Ethanol policy hits sweet spot
Tamil Nadu has finally come up with a policy that should sweeten the deal for
farmers and sugar factory owners. The primary goal of the Tamil Nadu Ethanol
Blending Policy 2023 is to attract investments worth ” 5,000 crore for molasses/grain-based ethanol production and make the state self-sufficient in meeting the estimated annual requirement of 130 crore litres.
The byproducts of this effort will be better income for farmers as demand for feedstock grows and a revival of the state’s sugar industry as utilization of existing
mills increases.
Worldwide, the future of the sugar industry lies in ethanol. In Brazil, the world’s largest sugar producer, only 40-45% of its sugarcane goes into sugar production.
Half the crop is directly used for ethanol production. After almost 20 years of talks and 5-6 years of real push, India has achieved 10% ethanol blend and is set to take
it up to 20% by 2025.
“It is quite a comprehensive and holistic policy and brings in a lot of clarity on taxation and licences. But one has to wait to see whether it will trigger new investments and enlarged production capacities because there are too many issues with some players having become non-bankable. It is surely one more opportunity,” says N Ramanathan, MD & CEO, Ponni Sugars Erode Ltd.
Though the policy offers clarity on establishing standalone ethanol plants and issues such as GST, there are no incentives or specific benefits for sugar mills. “We will not be able to take much advantage of the policy even though the demand for ethanol is huge. But there are supply side challenges. Since Tamil Nadu is a sugar-deficit state, the industry is able to make a slightly higher margin rather than opting for ethanol, which is determined by uniform pricing. Tamil Nadu sugar mills have to shell out 12-13% more towards the input cost for sugarcane thereby making any other option unviable without incentives,” says an industry veteran, who did not want to be named.
Not just the sugar mills, even sugarcane farmers have a list of woes. Cost of production is high, especially for harvest. Farmers spend 900 – 1,300 per tonne for harvesting alone, which amounts to 35% of thEir revenue. As a result, acreage under sugarcane cultivation is dipping.
From 255 lakh tones per annum (Itpa) 8-9 years ago, sugarcane crushing has come down to around 135 Itpa. Industry sources say faster mechanization of the harvest process is the need of the hour. But while the requirement is about 100 harvesters every year for the next three years, the state has been getting only a handful over the last couple of years. Unless more cane comes for crushing, sugar mills may not be able to focus on molasses-based ethanol. And, most units are unable to plan new investments to generate grain-based ethanol.
“There is no doubt that the ethanol blending policy will help the sugar industry to realize better profits since demand for ethanol in Tamil Nad is 130 crore litres and there are no challenges to selling it. But the policy’s larger focus is to provide farmers additional income options, especially since oil marketing companies provide better prices for grain-based ethanol,” says Pooja Kulkarni, special secretary, industries. Tamil Nadu has long been a millet consuming state, especially since it has never been water surplus. Hence crops such as maize could give better returns for farmers if more grain-based ethanol units come up, she says. A clutch of grain-based ethanol units are reportedly already in the works across the state.
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