Context: Ethanol Blending Petrol programme can give solution to the surplus sugarcane production in India.

More in news:

  • The government in July decided not to hike the fair and remunerative price (FRP) of sugarcane for the 2019-20 season (October-September).
  • The government approved an increase in the price of ethanol to be procured by public sector oil marketing companies (OMCs) from sugar mills for blending with petrol for the 2019-20.

Sugar Industry in India:

  • India is the second largest producer and the largest consumer of sugar in the world.
  • India contributes about 15 percent of world sugar production and has annual production of about 25-28 million tonnes in recent past.
  • Presently, about 5 million hectares of land is under sugarcane cultivation with annual production of about 356 million tonnes and average yield of around 71 tonnes per hectare in 2015-16.
  • Sugarcane contributes about 5 percent to the total value of output from agriculture and accounts for about 2.6 percent of gross cropped area.
  • About 50 million sugarcane farmers and a large number of agricultural labourers are involved in sugarcane cultivation and ancillary activities; therefore, the sector is an important driver of rural economy.
  • In India, there are mainly two distinct agro-climatic regions of sugarcane cultivation, namely tropical and subtropical. However, for the purpose of varietal development, five agro-climatic zones have been identified namely, (i) North-Western Zone (ii) North-Central Zone (iii) North-Eastern Zone (iv) Peninsular Zone and (v) Coastal Zone.

Commission for Agricultural Costs and Prices:

  • Commission for Agricultural Costs and Prices (CACP) was set up with a view to evolve a balanced and integrated price structure, is mandated to advise on the price policy (MSP) of 23 crops.
  • These include:
  • seven cereal crops (paddy, wheat, jowar, bajra, maize, ragi and barley),
  • five pulse crops (gram, tur, moong, urad and lentil),
  • seven oilseeds (groundnut, sunflower seed, soybean, rapeseed-mustard, safflower, nigerseed and sesamum),
  • copra (dried coconut), cotton, raw jute and sugarcane {Fair and Remunerative prices (FRP)}.
  • CACP submits its recommendations to the government in the form of Price Policy Reports every year, separately for five groups of commodities namely Kharif crops, Rabi crops, Sugarcane, Raw Jute and Copra.
  • Before preparing these five price policy reports, the Commission seeks views of various Central Ministries, State Governments, Farmers, Farmers Association and Research Institutes.

What is Ethanol?

  • Ethanol is basically alcohol of 99%-plus purity, which can be used for blending with petrol.
  • The normal rectified spirit used for potable purposes has only 95% alcohol content.
  • Both ethanol (also called anhydrous alcohol) and rectified spirit are produced mainly from molasses, a byproduct of sugar manufacture.
  • Mills typically crush cane with a total fermentable sugars (TFS) content of about 14%.
  • Much of this TFS – sucrose, glucose and fructose gets crystallised into sugar.
  • The un-crystallised, non-recoverable part goes into what is called ‘C’ molasses.
  • Every 100 kg of TFS, in turn, yields 60 litres of ethanol. Thus, from one tonne of cane, mills can produce 115 kg of sugar (at 11.5% recovery) and 45 kg of molasses (18 kg TFS) that gives 10.8 litres of ethanol.
  • The molasses can be diverted after the earlier ‘A’ and ‘B’ stages of sugar crystal formation.
  • Mills, then, would produce some sugar, as opposed to fermenting the whole sugarcane juice into ethanol.  
  • If ethanol is manufactured using ‘B’ heavy molasses (7.25% of cane and with TFS of 50%), around 21.75 litres will get produced along with 95 kg of sugar from every 1 tonne of cane.

Ethanol Blended Petrol (EBP) Programme:

  • Government has been implementing Ethanol Blended Petrol (EBP) Programme wherein OMCs sell petrol blended with ethanol up to 10%.
  • This programme has been extended to whole of India except Union Territories of Andaman Nicobar and Lakshadweep islands with effect from 01st April, 2019 to promote the use of alternative and environment friendly fuels.
  • This intervention also seeks to reduce import dependence for energy requirements and give boost to agriculture sector.
  • Government has notified administered price of ethanol since 2014. For the first time during 2018, differential price of ethanol based on raw material utilized for ethanol production was announced by the Government.
  • These decisions have significantly improved the supply of ethanol thereby ethanol procurement by Public Sector OMCs has increased from 38 crore litre in ethanol supply year 2013-14 to estimated over 200 crore litre in 2018-19.

What has government done?

  • Given the surplus sugar production in the country, it has allowed mills to produce ethanol from ‘B’ heavy molasses and directly from sugarcane juice.
  • The CCEA approved even use of sugar and sugar syrup for production of ethanol; mills can simply add these to the molasses mother liquor for further fermentation.
  • The CCEA approval includes fixing higher ethanol price derived from different raw materials under the EBP Programme for the forthcoming sugar season 2019-20 during ethanol supply year from 1st December 2019 to 30th November 2020:
  • The price of ethanol from C heavy molasses route be increased from Rs.43.46 per lit to Rs.43.75 per litre,
  • The price of ethanol from B heavy molasses route be increased from Rs.52.43 per lit to Rs.54.27 per litre,
  • The price of ethanol from sugarcane juice/sugar/sugar syrup route be fixed at Rs.59.48 per litre,
  • Additionally, GST and transportation charges will also be payable. OMCs have been advised to fix realistic transportation charges so that long distance transportation of ethanol is not disincentivised,
  • OMCs are advised to continue according priority of ethanol from 1) sugarcane juice/sugar/sugar syrup, 2) B heavy molasses 3) C heavy molasses and 4) Damaged Food grains/other sources, in that order,

How all this will help?

  • There is a huge incentive to produce ethanol today. This has been additionally facilitated by the government mandating 10% blending of petrol with ethanol.
  • If mills are able to divert more of cane juice for ethanol, it would mean producing less sugar. Since the country is producing too much sugar and is importing oil, the ethanol-blending programme is beneficial both for mills and for the country’s balance of payments.
  • Remunerative price to ethanol suppliers will help in reduction of cane farmer’s arrears, in the process contributing to minimizing difficulty of sugarcane farmers.
  • Increased ethanol blending in petrol has many benefits including reduction in import dependency, support to agricultural sector, more environmental friendly fuel, lesser pollution and additional income to farmers.

What Next?

  • The logical next step should be to dismantle the monthly sale quotas and minimum selling price restrictions imposed currently on mills.
  • Simultaneously, the government must push states to implement a transparent cane pricing formula, linking this to a certain minimum percentage of mills’ average realisations from the sale of sugar, ethanol and co-generation power.

Source: https://indianexpress.com/article/opinion/editorials/sugar-millers-farmers-ethanol-price-narendra-modi-government-5978101/