The sweet revolution: India’s transition from sugar mills to biorefineries

The Indian sugar industry, a cornerstone of the agricultural economy with roots in the colonial era, has long been a major contributor to rural livelihoods and national economic stability. However, the industry now faces significant challenges, including chronic overproduction, volatile prices, and the need for diversification. In response, the Indian Sugar Mills Association (ISMA) has recently called upon the government of India to support the conversion of sugar mills into biorefineries. This transformative proposal comes at a critical juncture for India’s sugar industry, presenting a potential solution to its current challenges and aligning with the country’s sustainable development goals.

Biorefineries, which produce a variety of valuable products from biomass, offer substantial potential benefits. They can transform agricultural residues and by-products into biofuels, biochemicals, and biomaterials, providing a diversified revenue stream and reducing environmental impact. This article explores how biorefineries can address the challenges of the Indian sugar industry and contribute to a more sustainable and resilient future.

Current State of India’s Sugar Industry

Production and consumption trends: According to the latest ISMA Sugar Yearbook and Ministry of Agriculture Statistics, India’s sugar production has shown significant fluctuations over the past five years: 

The cyclical nature of sugar production in India poses significant challenges for the industry. In years of surplus, the industry faces depressed prices and increased costs of storage and handling.

Domestic sugar consumption has been steadily increasing, reaching approximately 29 million tonnes in the 2023-24 season. Despite this growth in domestic demand, India has consistently exported surplus sugar. In the 2020-21 season, India exported 7.2 million tonnes of sugar, earning approximately ₹21,000 crore.

 Export Challenges

While exports have provided a relief valve for surplus production, they are not a sustainable long-term solution. The global sugar market is highly competitive, and export subsidies are increasingly being challenged at the WTO.

Ethanol Market Dynamics
 

Current market status -Ethanol is a fast-growing market in India, significantly driven by the use of molasses and the diversion of sucrose to fuel ethanol production. The sugarcane industry has been supporting the government’s intention to increase the ethanol blending rate. However, the coverage offered by the sugar industry is neither countrywide nor sufficiently comprehensive to assure future demand expansion.

Market Opportunities

The ethanol market offers a dynamic parity between sugar and gasoline markets, presenting an opportunity for both industry and state to arbitrage between global gasoline prices and sugar export prices.

Government Initiatives

The Indian government has committed to expanding ethanol production capacity in the grains sector. Strategic stocks of grains are administered by the government, which holds surplus supplies of rice. The planned expansion in ethanol capacity sees an increase in sugarcane-based output from 6 billion litres to 8.6 billion litres, while the grain sector is anticipated to rise from 3.2 billion litres to 8.4 billion litres to meet the 2025 requirement.

Production capacity and feedstock

As of November 2023, India’s ethanol production capacity is about 13.8 billion litres, with 8.75 billion litres being molasses-based and 5.05 billion litres grain-based. For the 2023/24 Nov 23-June 24 period, Oil Marketing Companies (OMCs) have purchased 4.02 billion litres of ethanol, with diverse feedstock allocation.

Investment and Economics

 The transition to biorefineries requires significant capital investment. According to a recent report by NITI Aayog, converting a sugar mill with a capacity of 5000 tonnes of cane per day into a biorefinery could require an investment of approximately ₹375 crore to ₹450 crore. This includes:

– ₹200-250 crore for equipment

– ₹100-120 crore for technology integration

– ₹75-80 crore for infrastructure development

Dr Pramod Chaudhari, Executive Chairman of Praj Industries, says, “While the initial investment is substantial, our projections show a potential ROI of 15-20 per cent within the first five years of operation, depending on the product mix and market conditions.”

Strength in Unity: The Cooperative Model for Biorefineries

Biorefinery Potential: Converting sugar mills into biorefineries is more feasible and practical through a consortium of mills, known as a cooperative or cluster model. This approach offers several benefits:

1. Shared Investment: Pooled financial resources reduce the burden on individual mills, making it easier to raise the ₹375 crore to ₹450 crore needed for investment.

2. Economies of Scale: A larger, centralized biorefinery can achieve lower production costs per unit and higher efficiency.

3. Risk Mitigation: Distributing risks among multiple partners lowers each mill’s exposure to potential losses or market fluctuations.

4. Improved Bargaining Power: A consortium can negotiate better deals with technology providers and secure government support more effectively.

5. Optimised Logistics: Strategically located biorefineries minimize transportation and logistics costs for feedstock supply and product distribution.

6. Shared Expertise: Combining technical knowledge and resources facilitates the acquisition of specialized skills needed for biorefinery operations.

7. Enhanced Feedstock Supply: A consortium ensures a more diversified and consistent year-round feedstock supply.

8. Easier Access to Funding: Larger collaborative projects are more attractive to banks and financial institutions, leading to better funding opportunities.

9. Research and Development: Consortia can fund R&D projects more easily, leading to innovations that benefit all participating mills.

10. Policy Influence: A united group of mills can advocate more effectively for favorable laws and regulations.

Implementation Challenges

 1. Coordination: Ensuring effective coordination among various stakeholders can be complex.

2. Profit Sharing: Establishing a fair framework for sharing costs and profits among participating mills.

3. Decision Making: Creating a robust governance framework to facilitate group decision-making.

4. Site Selection: Choosing a biorefinery location that optimally serves all participating mills.

Market potential

 The market for biorefinery products in India shows promising growth potential. A recent report by IMARC Group estimates:

– The Indian biofuels market size reached ₹17,620 crore in 2021, with an expected CAGR of 9.1% during 2022-2027.

– The global market for bio-based chemicals is projected to reach US$165 billion by 2030, presenting significant export opportunities for Indian producers.

Challenges and solutions

High initial investment: The substantial capital requirement (₹375-450 crore for a mid-sized biorefinery) is a significant barrier for many sugar mills. An industry expert specializing in the agro-industry suggests, “A cluster model, where multiple sugar mills collaborate on a single biorefinery project, can help distribute costs and risks. Additionally, the government could consider providing viability gap funding or interest subsidies to support this transition.”

Technical Expertise

Operating a biorefinery requires specialised skills that may not be present in traditional sugar mill workforces. The CSIR-IITR recommends, “Establishing dedicated biorefinery training programs in partnership with academic institutions and industry experts can help bridge this skills gap. The Sugar Technology Institute in Kanpur could play a pivotal role in this effort.”

Feedstock Availability

Ensuring year-round biomass supply is crucial for efficient biorefinery operations. The ICAR proposes, “Developing a diverse feedstock portfolio, including agricultural residues like rice straw and corn stover, can complement sugarcane bagasse and extend the operational period of biorefineries.”

Potential Drawbacks

While the transition to biorefineries offers many benefits, it’s important to consider potential drawbacks:

– Job Displacement: Some traditional sugar mill jobs may become obsolete, requiring careful management of workforce transitions.

– Environmental Concerns: Increased biomass collection could impact soil health if not managed sustainably.

– Market Volatility: The biorefinery products market may face price fluctuations, especially in its early stages compared to the conventional sugar market.

Case Study: Godavari Biorefineries Ltd.

Godavari Biorefineries Ltd. exemplifies successful sugar mill diversification into an integrated biorefinery. Key achievements include:

– Largest integrated biorefinery in India by installed capacity.

– Top ethanol producer in India by volume.

– World’s largest MPO (Methoxypropanol) manufacturer.

– One of only two global manufacturers of natural 1,3 butylene glycol.

– Only Indian manufacturer of bio ethyl acetate.

– Set up India’s first bio-based EVE (Ethyl Vinyl Ether) facility.

Facility and Capacity:

– Sameerwadi Manufacturing Facility: 18,000 TCD sugar mill crushing capacity, with plans to expand to 25,000 TCD.

– Ethanol production capacity: 570 KLPD, with plans to expand to 1,000 KLPD.

Product Portfolio:

 1. Bio-based chemicals (e.g., ethyl acetate, MPO, 1,3 butylene glycol).

2. Sugar.

3. Various grades of ethanol.

4. Power.

These products serve industries such as food, beverages, pharmaceuticals, flavors & fragrances, power, fuel, personal care, and cosmetics.

This case study highlights how a traditional sugar mill can transform into a diversified and sustainable biorefinery, creating value-added products and contributing to the bio-economy.

The Advantages of Biorefineries

The advantages of turning sugar mills into biorefineries include:

1. Diversification: Producing a variety of value-added products reduces reliance on sugar alone and mitigates risks associated with price volatility.

2. Revenue Streams: Generating multiple revenue streams, including biofuels, biochemicals, and biomaterials, enhances financial stability.

3. Sustainability: Biorefineries promote sustainable practices by utilizing agricultural residues and reducing environmental impact.

4. Employment: Creating new jobs in biorefinery operations and related industries can boost rural economies.

5. Energy Independence: Contributing to energy security by producing biofuels and reducing reliance on fossil fuels.

Conclusion

The conversion of sugar mills into biorefineries represents a visionary yet practical approach to revitalising India’s sugar industry. With strategic investments, government support, and industry collaboration, this transformation can lead to a more sustainable, diversified, and resilient future. The journey from traditional sugar mills to modern biorefineries marks a sweet revolution, turning challenges into opportunities and driving India toward a greener and more prosperous future.

(The author is MD Samarth SSK Ltd., Jalna)