News: 'Allow mills to process sugarcane into ethanol'

(BL 07/04/2007) New Delhi - The decision to create a 20 lakh tonnes (lt) sugar buffer on the Government account has come as a welcome respite to the beleaguered industry. But measures such as this offer only short-term palliatives. If the problem of episodic gluts in sugar is to be addressed on a sustainable basis, there is no alternative to evolving a coherent policy vis-à-vis ethanol, feels M. Manickam, Managing Director of Sakthi Sugars Ltd. "The buffer move is helpful to the extent it relieves the industry from the burden of interest and storage costs on the sequestered quantity. But it does not ride the system of surplus sugar. For that, mills should have the flexibility to process their entire cane into ethanol rather than sugar," he points out. The best thing about ethanol, Manickam adds, is that "you can simply burn it by blending with petrol". This is unlike the sugar accumulating in factory godowns, for which the Centre is now bearing part of the financing cost. Alcohol output Mills currently produce alcohol from molasses generated as by-product during crushing and constituting 4.5 per cent of the cane. Alcohol production essentially involves fermentation of sugar or sucrose. Molasses contains roughly 40 per cent recoverable sucrose and it is precisely this sugar that gets fermented into alcohol. One tonne of sugar can — assuming 100 per cent fermentation efficiency — yield 660-odd litres of alcohol. But since distilleries operate only at around 89 per cent efficiency, only 587-588 litres alcohol gets actually produced for every tonne of sucrose. Thus, if a mill were to crush one tonne of cane of say, 13 per cent sucrose content — of which 11 per cent is recovered in sugar manufacture and 1.8 per cent from molasses — it would end up producing 110 kg sugar and some 10.6 litres of alcohol. Compensation Alternatively, if the entire 13 per cent sucrose in cane were used for fermentation, it would yield over 76 litres of alcohol. Thus, while there will be no sugar, mills would produce an extra 66 litres alcohol. The basic issue, then, is what would be the appropriate alcohol price that compensates for the loss of business from sale of sugar. Cost-wise "For us, the cost of procuring cane and its conversion (inclusive of taxes and overheads) adds up to Rs 1,600 a tonne. If this cost is recovered on 110 kg of sugar, the effective realisation works out to Rs 14.54 a kg. But if no sugar is made and the Rs 1,600 per tonne cost is to be recovered on the extra 66 litres of alcohol, we need to be paid Rs 24.24 a litre. As against this, the oil companies are only paying Rs 21.50, which means there is no incentive to stop sugar production and convert the entire cane into alcohol," says Manickam. According to him, paying Rs 25 a litre for ethanol is not much, when petrol is retailing at Rs 42-48 a litre. "We are not asking for any subsidy. It is just a question of foregoing some revenue from taxes, which form 50 per cent or so of the consumer price for petrol," he adds. Importantly, this route will not entail the Centre forking out money on buffer creation or providing sops to sugar exports, as is the case now.