India now targets curbing molasses shipments, may impose 25% export duty

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Amid a possible drop in sugar production next season which may lower the availability of molasses, a key feedstock for ethanol production, the Indian Government is considering imposing a 25 per cent duty on the export of molasses to curb shipments and make it available for domestic distilleries.

Though the proposal to levy a duty on export has been under discussion for quite some time, the Finance Ministry is understood to have realised its importance now and may soon notify it, sources said.

“The decision is very crucial to check shipments as the target of ethanol blending with petrol has been set at 15 per cent during the 2023-24 season (November-October) against 12 per cent current season,” an official source said.

Output estimate

The Government is yet to release the sugar production estimate for next season (October-September), while the Indian Sugar Mills Association has pegged it at 31.68 million tonnes (mt), lower from an estimated 32.8 mt in ongoing 2022-23 season.

Export of molasses in the first quarter (April-June) of the current fiscal has been recorded at 2,83,598.19 tonnes worth ₹361 crore whereas in the entire 2022-23 fiscal it was 16,08,906.7 tonnes worth ₹2,034 crore, official data show. Industry officials said the main season for export starts from November after sugarcane crushing picks up and by April most of the crushing is completed in Maharashtra, Karnataka and Gujarat, the three major exporters of molasses.

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The country could have produced about 38 crore litres of ethanol from the molasses volume that was exported during 2022-23 fiscal, officials said. India exported mostly C-Heavy molasses which normally has a ratio of 235 litres ethanol from each tonne.

Countries such as the Netherlands, the Philippines, Vietnam, South Korea and Italy are the top five destinations of Indian molasses which are used for cattle feed manufacturing.

A welcome move

“It will be a welcome step if the government decides to restrict export of molasses. There is already apprehension of lower sugar production as sugarcane crop in Maharashtra and Karnataka has been affected due to dry August. Sugar mills in Maharashtra who have invested in setting up distilleries for ethanol production fear that they may not even be able to utilise 80 per cent of their capacities,” said BB Thombare, President, West Indian Sugar Mills Association.

However, a top official of a cooperative body of Maharashtra said though the ethanol blending programme (EBP) is a national scheme and should be given priority, the government should equally consider the impact of such a move on the small sugar mills who do not have distilleries and get better price realisation from export than selling the molasses to the domestic industry.