Govt mulls ethanol price hike for 2024-25 to boost production

Ethanol blending: In a strategic move to accelerate its ethanol blending program, the Indian government is considering a hike in ethanol prices for the upcoming 2024-25 season, which begins in November. This price revision is aimed at incentivizing production and meeting the ambitious goal of 20 per cent ethanol blending by 2025-26, a target initially set for 2030. The proposal also includes the diversification of feedstocks to ensure sustainable production.

Price Revision Linked to Sugarcane Costs
The ethanol price revision, under consideration by a government committee led by a joint secretary from the Ministry of Petroleum, will be based on the fair and remunerative price (FRP) of sugarcane. This adjustment is seen as critical to boosting production and helping India meet its green energy commitments. "The price revision is being considered on priority to incentivize production and meet our blending goals," a government source stated, emphasizing the urgency of the initiative.

Market Impact: Sugar and Ethanol Stocks Surge
Following the news, stocks of major sugar and ethanol manufacturers saw significant gains. Balrampur Chini Mills, a leading player in the industry, experienced a 5.19 per cent increase, trading at Rs 520.85 on the NSE. Shree Renuka Sugars and Praj Industries also reported gains, with their stocks rising by 3.79 per cent and 2.69 per cent, respectively.

Government's Multi-Dimensional Approach to Biofuel
Last week, Cooperation Minister Amit Shah reiterated the government's commitment to achieving the 20 per cent ethanol blending target by 2025-26. He called for a multi-dimensional approach to biofuel manufacturing, highlighting the role of ethanol in reducing India's dependence on fossil fuels and improving the financial stability of sugar mills.

Current Ethanol Pricing and Production Capacity
Ethanol prices have remained unchanged since the 2022-23 season, with rates set at Rs 65.61 per litre for ethanol produced from cane juice, Rs 60.73 per litre for B-Heavy molasses, and Rs 56.28 per litre for C-Heavy molasses. As of July 2024, India's ethanol blending rate reached 13.3 per cent, up from 12.6 per cent during the previous season. The country's total ethanol production capacity stands at 1,589 crore liters, with oil marketing companies purchasing 505 crore litres for blending purposes during the 2023-24 season.

Focus on Ethanol Production and Blending Goals
While the sugar industry has requested a hike in ethanol prices, an increase in the minimum selling price of sugar, and permission for sugar exports, the government is prioritizing ethanol production and the achievement of blending targets. This focus aligns with India’s broader objectives of enhancing energy security and promoting sustainable practices. The ministries of petroleum and sugar have yet to respond to queries regarding the potential price revision, but the decision is expected to play a crucial role in shaping the future of India’s ethanol blending program.