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Cane pricing: ISMA calls for adoption of global practices

11 September 2019


The Indian Sugar Mills Association (ISMA) has called for adoption of international laws and practices on cane pricing. Cane price should be automatically determined as a percentage of revenue from sugar and/or by-products, top officials of the association said.“If India has to become competitive, cane pricing policy should be rationalised quickly because there is a need to give price signals to farmers in India,” Abhinash Verma, director general, ISMA, told private sugar millers in Pune at the AGM of the Western India Sugar Mills Association (WISMA).


The opening stocks of 140 lakh tonne is the record highest ever as on October 1 of any season in the past, he said, adding that ideally, the carry over stocks from previous season should not be more than 50 lakh tonne. “Hence, 90 lakh tonne surplus sugar over and above the norm and ideal balance and the total of 140 lakh tonne block around Rs 500 billion, which is directly increasing costs, impacting cane price paying capacity to farmers,” Verma said.


The new Bio-fuel Policy in 2018 allows sugar mills/distilleries to make ethanol from cane juice, B-molasses, foodgrain, potato etc, and the price has been increased significantly for 2018-19, he said. There is a need to enhance ethanol production capacities since the government is already helping with subsidised loans, he said, underlining the long-term policy on ethanol pricing and procurement. As part of the road map for the 20% ethanol blending programme, the concerns of the automobile manufacturers to be addressed and there is a need to start work on flex fuel car manufacturing in India,” Verma said.


According to him, oil companies are currently targeting 10% ethanol blending. In 2017-18 (December to November ), around 4.5% blending was achieved. For 2018-19, 10% blending requires 3.3 bn litres annually and contracts were entered into for 2.4 bn litres (over 7% blend levels). As per the current supplies, about 6% blending is expected and India currently has over 80-90 lakh tonne of surplus sugar. Therefore, instead of making more sugar, there is enormous scope to divert surplus cane to ethanol, he said.


There is no shortage of ethanol demand, Verma said, pointing out that petrol consumption is increasing at a fast pace in India while the 20% blending standards have been approved and published by the government of India, which increases annual ethanol requirement to 7-8 billion litres, he said. Enough feedstock of surplus sugarcane is used and an attractive price has been fixed for ethanol by the government, he said.


Ethanol production capacity is the bottleneck since the current capacity only around 3.5 billion litres, he said. The significant increase in ethanol price from B-heavy molasses shows the government’s intent of reducing sugar production, he pointed out, adding that partial sugarcane juice clubbed with 100% cane juice and put in highest bracket.This apart, the government has approved creation of buffer stock of 40 lakh tonne from August 2019 to July 2020 and the buffer stock subsidy of Rs 1,674 crore against Rs 1,175 crore in July 2018-June 2019 takes away 40 lakh tonne from market for these 12 months, he said. Moreover, the Fair and Remunerative Price ( FRP) has remained the same for 2019-20 and retained at the same level at Rs 275 per quintal. The 60-lakh-tonne target of MAEQ (maximum admissible export quantity), which is different from MIEQ, where 100% of quota had to be exported for making claims, wherein the quota will be the maximum, he said. If not fulfilled on time, quota may get redistributed, Verma added.



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