INDIA: So far US$847.3 million in loan applications sought for ethanol expansion

Published: 10/03/2018, 7:07:14 AM

The domestic sugar industry has responded favourably to government's call for investments in expanding the ethanol manufacturing capacities. More than a hundred applications involving subsidised loans worth INR62 billion (US$847.3 million) from leading companies including Triveni Engineering, Dhampur and DCM Shriram to create new capacities have been approved in three months of announcement, according to India's Business Standard newspaper.

Data sourced from the department of food and public distribution shows than till date around 114 applications have been approved for setting up new boilers and distilleries along with expansion of existing ones.

Officials at the department said leading sugar firms including Renuka Sugars, EID Parry and Dwarikesh Sugar have sought approval for setting up additional capacities to make 1.25 billion litres of ethanol.

In most cases, leading companies have sought to set up or expand at more than one location. India currently has around 2.75 billion litres of ethanol capacity while to fulfill mandatory 10% blending it needs an ethanol capacity of 3.25 billion litres.

Tarun Sawhney, vice chairman and managing director at Triveni Engineering said the applications submitted by the industry are a proof that if the government comes up with an attractive policy the investments will follow.

"The atmosphere for investments in the domestic ethanol industry has never been better. If there was some clarity on a multi-year pricing of ethanol the response would have been even better," he said.

Triveni Engineering, Sawhney said, is investing in expanding its existing ethanol capacities as well as setting up of new capacities that will allow flexibility to convert nor just C-heavy molasses but also B-heavy molasses into ethanol.

Officials said once the new capacities come on stream in next 2-3 years, India will have sufficient ethanol to undertake a 10% blending with petrol. The total approved loan amount under the subsidized loan programme announced in June totals around Rs 62 billion so far as per available record, while more is expected to come.

The Central government in June for the first time fixed a separate price for ethanol produced from B-heavy molasses and C-heavy molasses. The former along with ethanol produced from sugarcane juice command a higher price than ethanol produced from C-heavy molasses.

Besides, in order it to bail out the loss-making sugar industry and help them clear cane dues, the government had announced INR70 billion relief package of which INR44.40 billion was in the form of soft-loan for upgradation of existing distilleries attached to sugar mills by installing incineration boilers and setting up new distilleries in sugar mills.

The central government will bear an interest subvention of maximum INR13.32 billion over a period of five years including moratorium period of one year on estimated bank loan amounting to INR44.40 billion to be sanctioned to the sugar mills by the banks over a period of three years.

Meanwhile, to further incentivize sugar mills, the Centre has enhanced the monthly domestic sales quota for those sugar mills which produce ethanol from B-heavy molasses or sugarcane juice. Ethanol produced from these two methods also called intermediary processes contains some amount of sugar left in them.

In its latest order, Centre has allowed mills to sell that much of amount of sugar which it sacrifices in making ethanol from B-heavy molasses or sugarcane juice to sell in the market over and above its mandatory quota.

In order to make 600 litres of ethanol from B-heavy molasses or sugarcane juice around a tonne of sugar is sacrificed. The mills can additional sugar in open market to improve cash flows. In India, sugar mills are allowed to sell a specified quota of sugar every month in the market to prevent erratic movements in prices.