Indian govt unlikely to hike price for ethanol from grain, C-heavy molasses

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The government will likely to raise the ethanol price between ₹1.50 and ₹1.70 a litre for the current ethanol supply year (ESY) that began in November 2024. However, the price increase is likely to be confined only to ethanol made from sugarcane juice/syrup and B-heavy molasses, sources said, adding the rates of ethanol made from maize, damaged foodgrains (rice) and C-heavy molasses may remain unchanged.

Until ESY 2023-24, ethanol prices were ₹71.86/litre if made from maize, ₹65.61/litre from sugarcane juice/syrup, ₹64/litre from damaged foodgrain (rice), ₹60.73/litre when made from B-Heavy Molasses (CHM) and ₹56.28/litre from C-heavy molasses (CHM). There was also a separate price for ethanol made from FCI’s subsidised rice supplied at ₹20/kg, which has since been discontinued.

The Petroleum Ministry has finalised the rates at which the oil marketing companies will buy the ethanol and the Cabinet is likely to soon approve the plan, the sources said.

Reasoning out

As there was a revision of ethanol prices for CHM and grains in the last ESY or a few weeks before November 2023, the government feels there is no need to increase it further. On the other hand, due to the ban on ethanol from sugarcane juice and BHM, there could not be any revision in their prices during 2023-24 ESY, the sources said.

At the recent annual general meeting, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) said that with rising capital and input costs, the price of ethanol from various feedstock requires revision. The industry body said it should be aligned with the fair and remunerative price (FRP) of sugarcane under a formula suggested by ISMA.

“A price increase would help cover the return on investment for new projects and offset the losses incurred due to the ban on sugarcane juice/syrup last year. This adjustment will motivate sugar mills to meet targets and continue contributing to the nation’s development,” it had said.

ISMA has also urged the government to come out with advanced biofuel policies to take forward the current ethanol blending programme (EBP) beyond 2025. Some of the suggestions given by ISMA include announcement of a subsidy plan of ₹35,000 crore to create an additional 770 crore litres of ethanol production capacity.

Need to scale up

Ethanol production capacity in the country was at 1,683 crore litres — 815 molasses-based, 126 dual feed and 742 grain-based — as of October 31 and it is enough to meet the demand for 20 per cent blending target by ESY 2025-26, sources said.

But according to ISMA, an increase in the demand for ethanol blending is expected to reach 1,127 crore litres in 2025-26 and further to 2,994 crore litres by 2034-35, requiring significant capacity addition.

India’s ethanol capacity should be scaled up to 2,362 crore litres by 2030-31 which is highly essential, said Deepak Ballani, Director-General of ISMA.