Sugar producers in India happy with ethanol blending and rising demand

The government’s decision to implement the ethanol blending target of 20% to 2025-26 from 2030 has brought an added optimism to sugar producers in the country.

Now, under the renewed target, 10% blending of fuel-grade ethanol with petrol should happen this year, increasing gradually each year thereafter and reaching 20% by 2025-26.

India’s sugar industry over the years had been experiencing very slow growth. Between FY14 and FY21, growth was just 3.6%.

The situation deteriorated during the pandemic as demand suffered and inventory levels with sugar producers reached record highs.

As the economy has opened up, however, increasing demand for sugar has helped matters. And the government’s decision to bring forward the ethanol blending target provided the icing.

According to an analysis by Centrum Broking, the revision in the National Policy on Biofuels, 2018, with the revised ethanol blending target, has already begun bearing fruit.

This is evident from the fact that even after the sugar season of 2020-21 saw an all-time high production of 31.2 million tonnes, inventory levels actually declined to 113 days, leading to an increase in domestic realisations.

Centrum Broking said that in the ongoing sugar season, inventory levels are expected to be just 83 days despite another round of record sugar production. This, again, will raise realisation for sugar companies.

Taking the indication from the government’s roadmap for ethanol blending with petrol, many sugar manufacturers have already lined up the significant expansion of the renewable fuel.