Govt imposes 50% export duty on molasses; extends lower duty on edible oils
New Delhi, Jan 16, 2024
Move seeks to ensure adequate quantities for ethanol blending and keep inflation in check
The government will impose a 50 per cent duty on the export of molasses from January 18, aiming to ensure adequate quantities for ethanol blending.
Separately, it extended lower duties on imported edible oils (crude and refined) till March 2025. The deadline was to end this March. Cheap imports for one more year will help in checking inflation, but they can hurt domestic oilseed growers. Mustard farmers are about to harvest a bumper crop of this rabi season.
Data shows that till November 2023 India had exported molasses worth $101.33 million in Financial Year 2023-24 (FY24), or 37.23 percent less than the same period of last year.
In the 2022-23 (October to September) sugar season, 0.45 million tonnes of molasses were exported from Maharashtra. The number stood at 0.175 million tonnes from Karnataka and 0.13 million tonnes from Gujarat, as per market sources. In total, around 0.775 million tonnes of molasses was exported from India in the 2022-23 season.
In the current 2023-24 sugar season, Maharashtra has issued licences for export of 0.25 million tonnes of molasses which can be extended upto 0.75 million tonnes. Karnataka has issued licenses for export of 50,000 tonnes, which can be extended upt0 200,000 tonnes and Gujarat has issued licenses for 0.115 million tonnes that can be extended upto 0.30 million tonnes, market sources said.
India typically exports 200,000-300,000 tonnes of molasses annually.
Domestic supply of sugarcane molasses is expected to dip this year due to low production. It is why the government first stopped ethanol production from sugarcane juice and will now impose a hefty duty of 50 per cent.
To achieve the 20 per cent blend target by 2025, around 15 per cent ethanol needed to be mixed with petrol by 2023-24 supply year, but most experts say that after sugarcane juice and syrup is taken away from the matrix (sugarcane juice has emerged as a big source of ethanol since the last few years), blending will not even touch 10 per cent in 2023-24, forget about 15 per cent or more.
However, after protest from the sugar companies, the government modified and eased some of the ban conditions and allowed the diversion of 1.7 million tonnes of sugar for making ethanol in 2023-24 supply year as against the earlier planned 4 million tonnes (this will help produce around 1.62-1.72 billion litres of ethanol).
Some experts feel that it is a small concession given that ethanol equivalent to around 2.2 million tonnes of sugar was already in the process of getting produced by mills.
The ban is also expected to impact the profitability of sugar companies for the next 6-8 months.
In 2022-23 season, in the just concluded ethanol supply year of 2022-23 (December-October), sources said of the 4.94 billion litres of ethanol supplied to the oil marketing companies (OMCs) a quarter estimated to be around 1.26 billion litres came from sugarcane juice or syrup as feedstock, while 2.33 billion litres (around 47 per cent) came from B-heavy molasses, while the rest around 1.30 billion litres came from grain-based sources.
C-heavy molasses contributed 0.06 billion litres of the total quantity of ethanol supplied to the OMCs in 2022-23.
In 2023-24 ESY, sources said of the 5.62 billion litres of ethanol promised to be supplied to the OMCs, around 2.69 billion litres would come from sugarcane based molasses while 2.92 billion litres would come from grains.
India’s net sugar production (after accounting for diversion for ethanol) in 2023-24 season is estimated to be around 29 million tonnes, down from 33 million tonnes last year.
However, some industry players said that there has been a change in the position and recovery has improved which is why output of sugar is now expected to be around 31 million tonnes.
Ethanol is produced from multiple sources in India. It is largely through sugarcane- or grain-based molasses and other sources as feedstock.
In sugarcane it is either through sugarcane juice or syrup, then B-heavy molasses and C-heavy molasses.
As per industry players, when ethanol is produced from sugarcane juice or syrup directly, then the maximum amount of actual sugar is lost or less produced.
This percentage of loss or less production is less when ethanol is produced from B-heavy molasses.
Then there is ethanol produced from C-heavy molasses where no sugar gets absorbed in the process.
Therefore, when actual sugar production is expected to be just marginally more than the consumption in 2023-24 season, the government, as per industry players, has decided that any further diversion of actual sugar for making ethanol.
In 2023-24 sources said around 1.6-1.8 million tonnes of sugar could be ploughed back to the total supplies by the order of the government to stop sugar companies from ethanol from juice and syrup.
After stopping production of ethanol from sugarcane juice, the OMCs have announced hefty hikes in procurement price of ethanol from maize and C-heavy molasses (that diverts least amount of sugar) to ensure that the blending programme is on track while sugar supplies too aren’t impacted by much.
Meanwhile, industry body ISMA (India Sugar & Bio-energy Manufacturers Association) while welcoming the government decision to levy 50 per cent export duty on ethanol said that it known that every year around 1.5 to 1.6 million tons of molasses is exported, which accounts for almost 10 per cent of the total quantity of molasses produced.
In ethanol terms, this molasses is worth around 3.8 billion litres ethanol.
"In the current scenario, where the Government of India has decided to restrict sugarcane juice/syrup for production of ethanol, and government is encouraging sugar mills to use maximum C Heavy molasses for the production of ethanol, with molasses being the main feed stock for production of ethanol, its availability in India will play an important role in contributing towards the Ethanol Blending Program" ISMA said.
[The Business Standard]
