Indian Government Considers Increasing Ethanol Prices to Limit Sugar Production
According to informed sources, the Indian Ministry of Oil may soon request approval from the government to raise the price of ethanol purchased by oil marketing companies from sugar mills in the 2019/20 crushing season to push sugar mills to produce more molasses with sugarcane.
A government official said that given that the FRP of sugarcane in the next crushing season will be unchanged Y-O-Y, the molasses-based ethanol prices may increase within a limited range. It is expected that in the 2019/20 crushing season, the government may increase the price of ethanol produced from 100% cane juice by 0.01 rupees per liter, and the price of ethanol produced by B-heavy molasses by 1.0-1.5 rupees per liter.
In the 2018/19 crushing season, India set the price of ethanol produced from molasses at 52.43 rupees per liter, while the price of ethanol produced from sugarcane was 59.13 rupees per liter. The current price of ethanol produced from molasses is 43.46 rupees per liter.
Although the FRP of the sugarcane in the 2019/20 crushing season has not changed, the government is still considering raising the price of ethanol to alleviate the oversupply of sugar in India's domestic market. The Indian Sugar Mill Association (ISMA) expects the Indian sugar carryover stocks in the 2019/20 crushing season to reach an all-time high of 14,500kt. The 2019/20 crop season sugar production is expected to be 28,200kt, down 14% Y-O-Y, higher than the annual sugar consumption of 25,500-26,000kt.
The oversupply of sugar in India and the low sugar prices have made it impossible for sugar mills to pay sugarcane farmers, and ethanol production may be the only way to increase profits. Union Minister Nitin Gadkari said the Indian sugar industry may face a crisis if it continues to produce sugar instead of turning to ethanol.
India's total annual production capacity of ethanol is expected to increase from the current 3.55 billion liters to 6-7 billion liters in the next two to three years, which will help India achieve more than 15% ethanol to gasoline blend ratio. The Indian government plans to achieve a 10% ethanol-to-gas blend ratio by 2022, reaching 20% by 2030.
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