In a move to encourage sugar mills to divert excess sugar cane for ethanol production, the Union Government on Friday doubles the incentive on sugar sacrificed for producing ethanol from October.

The decision was taken with a view to maintain the demand-supply position of sugar in the country and to stabilize ex-mill prices of sugar and also ensure sufficient availability of sugar for domestic consumption.

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The government on Friday said that incentive on sugar sacrificed for producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar has been doubled from October onwards in their monthly release quota.

“Now, those sugar mills which will be diverting sugar to ethanol would be getting the entire quantity of sugar sacrificed on producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar in their monthly release quota,” the Ministry of Consumer Affairs and Public Distribution stated in a statement.

In every sugar season (October-September), production of sugar is around 320-330 Lakh Metric Tonne (LMT) as against the domestic consumption of 260 LMT which results in huge carry overstock of sugar with mills. “Due to excess availability of sugar in the country, the ex-mill prices of sugar remain subdued resulting in cash loss to sugar mills. This excess stock of 60 LMT also leads to blockage of funds and affects the liquidity of sugar mills resulting in accumulation of cane price arrears,” the Ministry said.

In sugar seasons 2018-19 & 2019-20 about 3.37 & 9.26 LMT of sugar was diverted to ethanol. In the sugar season 2020-21, about 24 LMT of excess sugar has been diverted to ethanol. In sugar season 2021-22, it is likely that about 35 LMT of excess sugar would be diverted to ethanol. By 2025, it is targeted to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve the liquidity of mills thereby help in the timely payment of cane dues of farmers.

In the past three sugar seasons about Rs. 22,000 cr revenue was generated by sugar mills/ distilleries from the sale of ethanol to OMCs. In the previous sugar season 2020-21, about Rs. 12335 cr revenue has been generated by sugar mills from the sale of ethanol to OMCs which has helped sugarcane mills in making timely payment of cane dues of farmers.

In sugar season 2020-21, sugarcane worth Rs. 91,000 cr was purchased by mills, which is at an all-time high level and is the second-highest next to the procurement of paddy crop at Minimum Support Price.

Keeping the expected increase in the production of sugarcane in the sugar season 2021-22, sugarcane worth Rs. 1,00,000 crore is likely to be purchased by sugar mills, the Ministry said.

The Government has recently revised the fixed Fair and Remunerative Price of sugarcane at Rs. 290/ QTL at 10% recovery for sugar season 2021-22, which is Rs. 5/ QTL higher than the current sugar season, the Ministry said.