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A perspective on sugar industry & ethanol production

Ashok KadakiaThursday, November 26, 2009, 08:00 Hrs  [IST]

India is the largest producer of sugar in the world. In terms of sugarcane production, India and Brazil are almost equally placed. In Brazil, out of the total cane available for crushing, 45 per cent goes for sugar production and 55 per cent for the production of ethanol directly from sugarcane juice. This gives the sugar industry in Brazil an additional flexibility to adjust its sugar production keeping in view the sugar price in the international market as nearly 40 per cent of the sugar output is exported. The annual projected growth rate in the area under sugarcane at 1.5 per cent per annum has doubled during the last five years. This is because it is considered to be an assured cash crop with good returns to the farmers vis-a-vis other competing crops. India is currently passing through a glut situation with closing stocks at the end of the year of over 100 lakh tonnes since 1999-2000. Correspondingly, molasses production has also increased. The table below gives the production of molasses, alcohol utilization by the alcohol-based chemical industry, potable sector and the surplus at the end of each year. It is therefore evident that along with sugarcane production, phenomenal growth is also taking place in the production of molasses, the basic raw material for the production of ethanol from sugarcane. Of course, there are also other agro routes available to produce ethanol. According to MPNG, five per cent ethanol blends on an all-India basis would require 500 million litres. The current availability of molasses and alcohol would be adequate to meet this requirement after fully meeting the requirement of the chemical industry and potable sectors. Availability In the absence of a well knit policy in the past for purchasing and blending ethanol, not many distilleries have been producing ethanol. Only three distilleries attached to sugar mills had war years’ experience, and were able to gear themselves up to supply ethanol immediately. Now, about 11 factories in Uttar Pradesh will be adding facilities to produce about 75 million litres of anhydrous alcohol by end-September; seven units in Tamil Nadu (production capacity of 62.5 million litres of anhydrous alcohol); eight in Karnataka (anhydrous alcohol production capacity of 665 million litres); and four units in Andhra Pradesh (capacity of over 40 million litres). Similar steps have also be taken up by the co-operative sector units in Maharashtra, Punjab and UP. By the end of the year it is estimated that about 300 million litres capacity would have been created for the production of anhydrous alcohol. As capacities are built up, the oil sector should also be able to generate that much demand for ethanol to guard against any idling capacity. The Petroleum Ministry may therefore look into this matter and ensure that the oil sector speeds up the creation of requisite facilities for blending ethanol with petrol. So far generation of demand for ethanol has been very low and it takes considerable time for IOC’s units to finalize purchase of ethanol against offers made by distilleries in response to their tenders. In the Indian Sugar Mill Association, this matter was recently examined and it was concluded that instead of taking up the scheme on a state-wise basis, it would be appropriate to take it up in metropolitan and other cities where environmental pollution is a major concern. The blending should be taken up to 10 per cent and introduced selectively to make a better impact on the environment, as no changes in the engine or carburetor are required, and other countries are already carrying this out successfully. The cost factor There is considerable scope for further reduction in the cost of production of both sugarcane and sugar in India with liberalization of controls on the sugar industry. Consolidation of land holdings and corporate farming on the raw material side and expansion of capacity on the unit size are important developments and would lead to substantial improvements in productivity, thereby rendering India a cost-effective producer of sugar in the world. The area under sugarcane is presently less than two per cent of total cultivable area in the country and about three per cent of the irrigated area. There is considerable scope for increasing the area under sugarcane considering the fact that it is more profitable compared to other crops. The Planning Commission has visualized a conservative increase in area under sugarcane by six lakh hectares during the 10th Plan period, but considering past trends, the area under cane is likely to exceed five million hectares (see table). During the 10th Plan period, the annual incremental growth in consumption has been estimated at nine lakh tonnes per annum. For the first time the Indian Government has fixed a target of 15 lakh tonnes per annum for export for this period. However, the production target was fixed at 21.3 million tonnes keeping in view the large carry forward stocks at the beginning of the period and to correct the demand-supply distortions presently caused. These targets are achievable looking at the performance of the industry in the past with a production of 18.5 million tonnes achieved in 2000-01. Conclusion In conclusion, the sugar industry will not be lacking in meeting the requirement of ethanol. In a market economy, there would be a considerable shift from the gur and khandsari sectors which are inefficient producers with poor quality. In the current scenario of glut in sugar production, it may be advisable to divert such additional cane for the production of alcohol after meeting the sweetener requirement. The additional availability of alcohol on the assumption that the entire cane is utilized for the production of sweeteners will be about 200 million litres over and above that indicated in the table. Alternatively, if additional cane available is utilized for the production of alcohol to bring in a balance in the demand and supply of sugar, the alcohol production at the end of the 10th Plan would be around 1,485 million litres. The task force on the sugar industry for the Tenth Five Year Plan has suggested the evolution of a national policy on alternative fuels, which would include the use of ethanol-blended gasoline. Until such a policy is evolved, sugar factories and distilleries should be encouraged to produce ethanol from the surplus alcohol available with them, a report of the task force says. For this, it suggests providing loans from the Sugar Development Fund at six per cent per annum for up to 60 per cent of the project cost. The ministry of petroleum and natural gas and the oil companies, in consultation with the department of food and public distribution, the All-India Distilleries Association and the apex bodies of the sugar industry, can set a reasonable price for ethanol produced by distilleries for the purpose of blending with gasoline. Considering the environment-friendly characteristics of ethanol-blended gasoline as an automobile fuel, the pricing of ethanol needs to be viewed not only in terms of a financial cost-benefit analysis, but also in terms of an economic cost-benefit analysis, the report adds. In Brazil 20-24 per cent of ethanol is blended in gasoline. In the US, 10 per cent of ethanol, produced mainly from maize, is blended with gasoline. There has been a steady increase in the production of alcohol in India, with the estimated production rising from 887.2 million litres in 1992-93 to nearly 1,654 million litres in 1999-2000. Surplus alcohol leads to depressed prices for both alcohol and molasses. According to the task force, the projected alcohol production in the country will increase from 1869.7 million litres in 2002-03 to 2,300.4 million litres in 2006-07. Thus the surplus alcohol available in the country is expected to go up from 527.7 million litres in 2002-03 to 822.8 million litres in 2006-07. Utilization of molasses for the production of ethanol in India will not only provide value-addition to the by-product, it can also ensure better price stability and price realization of molasses for the sugar mills. This will improve the viability of the sugar mills, which will in turn benefit cane growers. With gasoline demand expected to increase from 7.9 million tonnes in 2001-02 to 11.6 million tonnes in 2006-07, the requirement of ethanol at five per cent blending is expected to rise from 465 million litres to 682 million litres. Source : 10th Five Year Plan. -The author is President,All India Alcohol Based Industries Development, Association (ABIDA)

 
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