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Informist, Monday, Jun. 2, 2025

 

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--Sugar federation: Govt mulling 5% ethanol blending in diesel
--Sugar federation: Nothing concrete so far to up ethanol blending above 20%
--Sugar federation: Dec 2023 ban on ethanol mfg from molasses left deep scar
--Sugar federation: Distillers worry ethanol mfg policy inconsistencies
--Sugar federation: Of 66 co-op distilleries, 7 applied for ethanol scheme
--Sugar federation: Distillers' interest in ethanol interest subsidy low
--Sugar federation MD: Co-op distillers cautious to expand ethanol capacity
--Sugar federation: Sugar smuggling swelled domestic consumption in '23-24
--Sugar federation: 2024-25 sugar demand slowdown seen on high base last yr
--Sugar federation:Early flowering stunted cane growth Maharashtra, Karnataka
--Sugar federation: C0-0238 cane variety disease-prone, lived its life
--Sugar federation: UP dragged 2024-25 sugar output on poor cane variety
--Sugar federation: Industry worried over fewer operation days in 2024-25
--Sugar federation:  25-26 sugar output may rebound to 2023-24 levels
--CONEXT: Sugar output 2024-25 fell over 18% on year to 26.1 mln tn
--CONTEXT: Sugar federation MD Naiknavare in an interview with Informist
--Sugar federation: 2025-26 sugar output to rebound, see 20% up on yr

 

By Afra Abubacker

 

NEW DELHI – The National Federation of Cooperative Sugar Factories has forecast India's sugar output to rebound sharply in the upcoming 2025-26 (Oct–Sept) season. Expectations of above-normal rainfall, increased sugarcane area, and a well-timed hike in sugarcane fair and remunerative prices, production is forecast to rise by at least 20%, said Prakash Naiknavare, the managing director of the federation. Sugar output has fallen by over 18% on year to 26.1 million tonnes in the current season 2024-25.

 

"It (2025-26 sugar output) will come back to normal. It might come back to 2023-24 levels. We did 31.9 million tonnes (sugar) in 2023-24, we might just come about that," Naiknavare told Informist.

 

Amid a sharp fall in sugar output this year, Naiknavare said mills had to cut short their operational days to just 90-120 days in major states against the ideal 150-day season. "That is a major cause of worry. Because when the season is shortened to 90 days, all your overheads are still for 365 days. And the economic scale of operation is adversely affected," he said.

 

Naiknavare noted that even though the government is pushing for CO-0238 cane variety cultivation in Uttar Pradesh, it has aged and become disease prone. "It has lived its life." It needs to be replaced rapidly with advanced varieties, he added.

 

The 2024-25 sugar season is facing complex market fundamentals--high inventories, a shortfall in production, and a slowdown in demand. That should explain why sugar prices are largely stable despite a sharp fall in production. On May 30, ex-mill sugar rates were around INR 3,875-4,072 per 100 kg against INR 3,810-3,975 per 100 kg last year.

 

Naiknavare noted that demand appears to have slowed down. "The so-called slowdown this year is a result of artificial swelling in consumption last year," he said. In 2023-24, more than 700,000 tonnes of sugar crossed the border of Nepal and Bangladesh illegally, inflating domestic demand, he added. With the government opening sugar exports in January, "domestic consumption has corrected," he said. General Election had also boosted sugar demand last year.

 

In addition, traders and institutional buyers stocked up on sugar amid media reports of the government mulling a hike in the minimum selling price of sugar. The government had considered raising the minimum selling price of sugar to INR 35.5 per kg against the current INR 31.0 per 100 kg, according to government officials and industry sources. However, the proposal got stalled at higher levels.

 

On the ethanol front, Naiknavare said cooperative distillers are cautious to invest and expand their production capacities despite government incentives. The federation had run a campaign to convince cooperative distillers to invest in multi-feedstock infrastructure and help them expedite the loan applications under the ethanol interest subvention scheme.

 

However, the results were poor as the industry has lingering concerns over the government's policies on ethanol production. "They are yet to come out of the shock of the December 7 (2023) order when the government suddenly banned ethanol production from molasses," he said.

 

The scheme provides financial help to cooperative sugar mills to become multi-feedstock distilleries and produce ethanol from grains--maize, rice, and damaged foodgrains--besides sugar. Molasses-based distillers have a restricted time for making ethanol as sugarcane crushing is seasonal.

 

To ensure ethanol supply round the year, the government, on Mar. 6, announced an interest subvention scheme exclusively for cooperative sugar mills. Under the scheme, the government will provide an interest subvention of 6% per annum or 50% of the interest rate charged by financial institutions, whichever is lower, for five years, including a one-year moratorium against the loan availed by project proponents.

 

The following are edited excerpts from the interview:

 

Q: Most mills have concluded crushing operations for the 2024-25 season. How would you review the season that is marked by an over-18% year-on-year shortfall in sugar production? What happened?

 

A: The main blame goes to Uttar Pradesh. In Uttar Pradesh, farmers are cultivating disease-prone CO-0238. No matter how much the government is doing propaganda, we have got to get rid of it. CO-0238 has lived its life. Normally, any new variety lives for about eight years. This variety has seen some 12 years now. They are easily prone to red rot disease. Replacement is taking place, but not at a desirable pace. Because of an aging and disease-prone CO-0238 variety, sugar recovery rates fell to 9.3% from 10.9% last year. Farmers are still using CO-0238 because they don't have an alternative promising variety.

 

Q. Is this only happening in Uttar Pradesh?

 

A. Yes, because this variety is only suitable for north. It cannot be grown in other areas.

 

Q. But sugar production has also dipped in Maharashtra. Most mills closed early this season. What happened?

 

A. Maharashtra is different. There was an early flowering of sugarcane. When sugarcane is standing a crop, it requires a certain amount of sunlight. But this time, because of the longer retreat rain, they didn't get enough sunlight, and the cane crop flowered prematurely. Flowering means cane growth has stopped, and farmers become keen to get rid of the cane.

 

Q: What's your outlook for the upcoming 2025-26 sugar season?

 

A: Sowing for 2025-26 is complete in Maharashtra, Karnataka, and Gujarat. Early rainfall, full reservoirs, and a timely hike in FRP (fair and remunerative prices) of cane gave farmers the confidence to plant more. The area under sugarcane has increased, and productivity is expected to improve. All signs point to at least a 20% rise in sugar output. (The government hiked cane fair prices by INR 15 to INR 355 per 100 kg for the 2025-26 sugar season)

 

Q. You are saying a 20% rise from this year, right? But this year, sugar production is almost 18% down from last year. So is it a jump in production?

 

A. It will come back to normal. It might come back to 2023-24 levels. We did 31.9 million tonnes of sugar in 2023-24, we might just come about that.

 

Q. Apart from lower sugar recovery, what were the other problems in 2024-25?

 

A. Most Maharashtra mills have expanded their crushing capacity. So a mill that crushed about 400,000-500,000 tonnes of sugarcane normally, immediately requires about 800,000 tonnes to run at optimal capacity utilisation. So, sugarcane got distributed among mills, and the crushing season got shortened.

 

The ideal season should have 150 operational days. But this year, the season was cut short to about 90 days in Maharashtra. Gujarat was 90-95 days. Karnataka was some 83 days. Uttar Pradesh did about 120 days. No state could complete the entire normal crushing period. That is a major cause of worry, because when the season is shortened to 90 days, all your overheads are still for 365 days. And the economic scale of operation is adversely affected.

 

Q: There seems to be a slowdown in sugar demand. Almost every month, we see lower sugar sales quotas than last year. How do you assess the demand situation?

 

A: Consumption is stable, growing naturally at about 2.1% annually due to population growth. The so-called slowdown this year is a result of artificial swelling in consumption last year. Last year, more than 700,000 tonnes crossed the border of Nepal and Bangladesh illegally, inflating domestic demand. The government has opened sugar exports this year, so domestic consumption is now corrected. 

 

Also, 2023-24 sugar consumption was high because of the General Election. Plus, traders and institutional buyers had hoarded sugar last year, expecting a hike in the minimum selling price of sugar, which didn't come. Their overstocking blocked the pipeline, distorting prices.

 

Q: You've recently wrapped up the campaign to expedite loan applications under the ethanol interest subvention scheme. How was the turnout?

 

A: The turnout was very encouraging. We conducted two major camps--one in Pune for Maharashtra and Gujarat, and another in Chikodi for Karnataka and Tamil Nadu. Industry representatives, government officials, funding agencies like NCDC (National Cooperative Development Corporation), and technology providers such as Praj Industries were all present.

 

The enthusiasm was visible, but there was still caution. They are yet to come out of the shock of the December 7, 2023 order when the government suddenly banned ethanol production from molasses. We clarified that such disruption won't happen again, but the trust rebuild is ongoing.

 

Q: Why is the industry cautious when the scheme provides loans to diversify their feedstock for ethanol production? Isn't diversification de-risking policy uncertainties?

 

A: Once the seed of doubt is planted, it grows. The December order banned ethanol production from molasses to save some sugar. And the thinking is that if a ban could happen on molasses, then it could happen on other feedstocks as well.

 

Earlier, the government asked sugar mills to invest in distilleries to make ethanol from molasses. Mills went ahead, invested, created capacity, and suddenly got this shock. And now the government is pushing for multi-feedstocks. Millers ask what's the guarantee that the ban won't repeat? We had a tough time convincing them that it would not happen again.

 

Q: The ethanol interest subvention scheme is currently only for cooperative mills. Why not for all mills?

 

A: Yes, it's exclusively for cooperative distilleries. The government recognised they were falling behind private players. Historically, cooperatives faced procedural delays and weaker financial positions. When the ethanol interest subvention scheme was first introduced in 2018, private mills moved quickly.

 

Now, the government is pushing cooperatives. If this scheme were left to individual mills to act alone, little progress would have been made. The application window was limited to 6 months till September. That's why the federation took the lead and brought all stakeholders together in these camps.

 

Q: Out of 66 eligible mills, only seven have applied so far. Why such a slow start?

 

A: There were questions on policy sustainability, which we clarified. I am not discouraged; only seven applications have come in. As the days pass, they have to take calls. I am expecting at least 2-3 more applications to be in line. There is time left till September, we are expecting more applications.

 

Distillers in Karnataka have shown more interest in shifting to multi-feedstock. There is a lot of maize available in some Karnataka regions. But there's a reluctance due to the recent increase in maize minimum support prices. Then, there's hesitation because ethanol prices have remained unchanged for two years, while sugar prices have increased. Mills fear losing margin if they divert cane juice or B-heavy molasses to ethanol production.

 

Q: But isn't subsidised rice from the Food Corp. of India available to mills as feedstock for ethanol production?

 

A: Yes, but even FCI rice prices were revised upwards--from around INR 2,000 per 100 kg in 2022-23 to INR 2,250 per 100 kg in 2024-25. So again, mills are calculating their margins. It's all part of a broader uncertainty that's slowing decision-making.

 

Q: What's the capacity utilisation of existing distilleries? What kind of investments are we speaking about? How big are the loans?

 

A: Most plants can operate for over 300 days a year, but typically run for only 150-160 days as molasses supply is seasonal. The idea is to use the remaining downtime to process maize or rice and maintain liquidity. That's the whole logic behind pushing cooperative distilleries for multi-feedstock capabilities. The project cost to diversify into multi-feed stock distilleries with 100 kilo litres per day production capacity is around INR 536.8 million.

 

Q. Are there talks of the government raising the ethanol blending target beyond 20%? Has something concrete been built around it?

 

A. Nothing concrete. The government has prepared a roadmap suggesting blending beyond 20% and a second possibility of blending ethanol with diesel. They call it ED-5. Whether it will come about or not is not certain.  End

 

Edited by Deepshikha Bhardwaj

 

 

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