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By 2023 We Are Planning To Have Zero Surplus Sugar By Diversion To Ethanol: Abinash Verma, DG, ISMA
The Indian Sugar Mill Association (ISMA) is trying to make a road map that every year we can reduce our surplus sugar by 20 lakh tons. And 2023 ISMA is planning to have zero surplus sugar by diversion to ethanol Abinash Verma, Director General of ISMA tells Urvi Shrivastav of BW Businessworld. Excerpts:
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How will sugar mills pay outstanding arrears to the farmers, and what role is ISMA playing?
The law of the country says that we must buy all the sugarcane produced and offered by the farmers, even if we are not able to sell it. We buy for five to six months and have to pay the farmers, but we are able to sell the sugar for 17-18 months because there is too much sugar and the domestic requirement is way less. Sugarcane that we buy constitutes almost about 75 per cent of our total cost, and 80 per cent of our revenue comes from sugar alone and about 20% comes from by-products. The revenue comes in about 18 months or so, leading to a mismatch between the cash inflow and the cash outflow. At the current cost of production that we have calculated works to almost 35 Rs/kg, but we are not getting more than Rs 31-32 across the country. The government in 2018 started fixing the Minimum Selling Price (MSP) of sugar, which was Rs. 31 per kilo as of February 2019, and there has not been any revision since then. A group of ministers under Home Minister Amit Shah in July 2020 had recommended for an increase in the MSP from 31 to 33 Rupees, with NITI Ayog in its report of April 2020 recommended the same. Considering inflation and other factors, we would like MSP to be Rs 34.50 per kilo. The government did announce an export policy as late as December, which should have come at the beginning of the season as of September 2020.
When we talk about the export of sugarcane, to what extent can the subsidy on export help curb the current prices?
The export subsidy announced by the government at the end of December at Rs 6 per kilo or Rs 6000 per ton of sugar exports. Because the international prices are good and there is a deficit in the international market of 4 to 6 million tons, due to which global prices are much better this year. With Rs 6 subsidy given by the government, it makes sense that we can export sugar, given that gap between domestic and international prices is bridged.
As an aftermath to the pandemic, do you see as the silver lining for the sugar industry?
The sugarcane industry was not negatively impacted as so many other sectors in the country. There was a dip in the demand for sugar during the lock-down, but we saw that the demand picked up again because the consumption of sugar in households picked up. I don't think we got impacted very badly, so we do not see any kind of recovery or any kind of requirement thereof.
With ethanol blending gaining traction again, what do you say about the policy of diverting sugar cane to ethanol blending as a way of generating profit?
I think this is one of the most brilliant policies of this government. From December 2014 a decision was taken by the Prime Minister to have a fixed pricing policy. From there on they started announcing multiple prices depending on the feedstock. The crude oil prices have dropped internationally, but the government did not let it affect the ethanol price. They were bold enough to increase the ethanol prices in the next season because the feedstock prices were higher. The government also brought the interest subvention scheme to increase ethanol production capacity. The joint secretary sugar, research secretary food, the secretary petroleum, the secretary financial services regularly meet to monitor the position of the loans, factories, and how they can hasten the clearance by the environment ministry. Today, we have enough feedstock’s the government is encouraging us to move sugar cane juice and B-heavy molasses to ethanol.
What is the future of diverting sugarcane to ethanol?
It's very positive when we are moving fast to develop ethanol production capacity. Sugar industries producing 60 lakh tons of sugar every year. ISMA is trying to make a road map that every year we can reduce our surplus sugar by 20 lakh tons. By 2023 we are planning to have zero surplus sugar by diversion to ethanol.
How can the government help in terms of infrastructure to accelerate conversion to ethanol?
The government’s target is 10 per cent average blending by 2022. The problem is that we produce sugarcane in three states—Uttar Pradesh, Karnataka, and Maharashtra. Transporting ethanol to far-flung states will be extremely expensive. Therefore, we need to find a way to increase blend percentage from 10 to 20 per cent in the state where sugar cane is produced. The automotive industry also needs to make cars that can take 20 per cent ethanol-blended petrol, and the existing depots must increase the tanking capacity across the country. The BIS standard has to be developed and we have to target 15 per cent in the next couple of years.