Cabinet decision:Sops for more ethanol output from sugarcane

Cabinet decision:Sops for more ethanol output from sugarcane

News

1. Cabinet Committee on Economic Affairs (CCEA) has taken a decision to provide incentives for the production of ethanol from sugar cane.

Important Facts

2. In India, ethanol is mainly produced from sugarcane molasses by fermentation process
3. Since ethanol is produced from plants that harness the power of the sun, ethanol is also considered as renewable fuel.
4. Ethanol Blended Petrol programme was launched in 2003 on a pilot basis and has been subsequently extended to 21 states and 4 Union Territories.
5. The government has been notifying the administered price of ethanol since 2014.
6. India has set a target of 10 percent ethanol blending in petrol by 2022.

CCEA Recommendations

7. Government has announced that it will offer higher rate to those sugar mills that produce 100 percent ethanol from sugarcane, without producing sugar.
8. The government has announced three progressive rates for ethanol based on their purity.

• Ethanol produced from 100 per cent sugarcane juice will be priced the highest.
• Ethanol produced from B grade molasses: They are made from partial sugarcane juice and will be priced lower than those produced from 100 per cent sugarcane juice.
• Ethanol produced from C grade molasses: Inferior than B grade molasses and will be priced the least

9. Advisory to Oil Market Companies (OMCs): They have been advised to prioritize ethanol procurement based on the purity and give preference to ethanol made from 100 per cent sugarcane juice.

Benefits

10. The move will encourage the production of ethanol and will thus reduce the sugar production in the country, thereby preventing the price crash of sugar.
11. It will increase the liquidity with the sugar mills and will help them settle the dues of the farmers.
12. It will incentivize ethanol output and will increase Investment in capacity addition.
13. It will help in making Ethanol available for Ethanol Blended Petrol (EBP).

Challenges

14. Sugar Mills will have to invest in distillery capacity.
15. They will also have to invest in pollution control, storage and logistics

Criticism

16. When fuel prices will decline the oil companies will want to pay lower for ethanol which will result in ethanol producers suffering.
17. If ethanol price will decline, the sugar mills will find their margin reduced because their sugarcane purchase price is fixed.
18. If the government forces the oil companies to pay the same ethanol price then oil companies will suffer.
19. Bad weather can damage cane resulting in decline in sugar output and market price of sugar will thus increase.

Suggestions

20. Government should allow the market to determine the cane price.
21. Government should link the price of cane to the blended realization that a mill earns from sugar ethanol, cogeneration of power.