Sugarcane held for sugar: Will ethanol fall short? | Mint

Sugarcane held for sugar: Will ethanol fall short?

B-heavy molasses can be used as substitute feedstock for ethanol and the Centre has asserted that India’s blended-fuel ambitions won’t be hit.
B-heavy molasses can be used as substitute feedstock for ethanol and the Centre has asserted that India’s blended-fuel ambitions won’t be hit.

Summary

  • Incentives could be deployed to ramp up ethanol volumes but it’s usually best to minimize policy distortions and let markets function freely.

India’s government has banned the use of sugarcane juice and sugar syrup for ethanol production in the current supply year that just began. The move was presumably in fear of a sugar output drop in the ongoing crushing season after a weak monsoon, particularly in states like Maharashtra and Karnataka. 

As sugar demand is relatively inelastic, a shortfall could have meant price spikes that reserving cane juice might pre-empt. With Lok Sabha polls due in 2024, that risk is being mitigated. Yet, an ethanol shortage could arise too. While B-heavy molasses can be used as substitute feedstock for ethanol and the Centre has asserted that India’s blended-fuel ambitions won’t be hit, how smoothly this market intervention goes will be under watch. The country is aiming for 15% ethanol-blended fuel this year and 20% by 2025, but amid reports of anxiety over potential alcohol scarcity. 

Remember, the liquor industry needs this fluid too. Not that an optimal allocation isn’t possible. Incentives could be deployed to ramp up ethanol volumes from various grains, for example, apart from B- and C-heavy molasses. But it’s usually best to minimize policy distortions and let markets function freely.

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