Govt removes cap on sugar diversion for ethanol production for ESY 2024-25

The Union government has introduced a significant policy change, permitting sugar mills to use cane juice or syrup to produce ethanol for the Ethanol Supply Year (ESY) 2024-25, beginning November 1, 2024. This update, revealed in a notification on August 29, 2024, eliminates the previous limit on the amount of sugar that could be diverted for ethanol production.

Along with cane juice and syrup, the new policy also allows the use of B-Heavy and C-Heavy molasses for ethanol production.

According to the Ministry of Consumer Affairs, Food and Public Distribution, “Sugar mills and distilleries are allowed to produce ethanol from sugarcane juice/sugar syrup, B-Heavy molasses as well as C-Heavy molasses during ESY 2024-25 as per the agreement with OMCs.”

This adjustment aims to advance the government's objectives of boosting renewable energy use and decreasing reliance on fossil fuels.

The government has additionally permitted distilleries to buy up to 2.3 million metric tons of rice from the Food Corporation of India, exclusively for ethanol production. This initiative aims to increase ethanol output and further the broader strategy of blending ethanol with fuels.

To prevent disruptions in domestic sugar availability, the Department of Food and Public Distribution (DFPD) and the Ministry of Petroleum and Natural Gas (MoPNG) will work together to monitor and review the diversion of sugar for ethanol production.

The Ministry of Consumer Affairs, Food and Public Distribution stated, “DFPD, in coordination with the MoPNG, shall periodically review the diversion of sugar to ethanol production vis-a-vis the production of sugar in the country, so that year-round sugar availability for domestic consumption is maintained.”

This policy change is part of the government's continuous efforts to boost ethanol production and support sustainable energy initiatives. By expanding the range of sugar derivatives allowed for ethanol production, the government seeks to improve the efficiency and adaptability of the ethanol supply chain while ensuring the stability of domestic sugar supplies.

The full implications of this policy shift on the sugar and ethanol markets have not yet been revealed. Industry stakeholders and market analysts will be watching closely to assess the impact of these changes in the months ahead.