No Price Hike For Sugar-Based Ethanol A ‘Dampener’: Shree Renuka Sugars’ Atul Chaturvedi

Sugar companies are facing a major setback after the government decided to keep prices for ethanol derived from sugar-based feedstocks unchanged for Ethanol Supply Year (ESY) 2025–26.

The sugar industry wants the price of sugar-based ethanol to be brought on par with ethanol derived from maize, according to Atul Chaturvedi, Executive Chairman, Shree Renuka Sugars. 

“It will be difficult for us to gauge the total hit, but definitely, there has been a dampener and a big one at that. The sugar industry was clamouring for at least parity with maize ethanol, but instead of that, we are still stuck at where we were,” he said during a conversation with NDTV Profit on Wednesday.

“We still hope that the government would possibly re-look at this and maybe whatever rise in FRP (Fair and Remunerative Price) has happened, that might happen,” he added. 

While the price for ethanol from sugar-based feedstock remains unchanged at Rs 65.61 per litre, that of ethanol derived from rice has been hiked by 3% to Rs 60.32 per litre from Rs 58.50 per litre. The basic procurement price for maize-based ethanol stands at Rs 66.07 per litre.

Responding to the increase in prices for rice-based ethanol, Chaturvedi said, “It seems that the rice stocks in the country have become too burdensome for the government and that is why they want to liquidate the rice stocks as soon as possible. But this definitely is not a happy situation as far as the sugar is concerned.”

Analysts had anticipated a 3 to 4% hike in sugar-based ethanol prices, which was meant to provide mills with some relief against the higher Fair and Remunerative Price (FRP) of cane. The absence of a pass-through is likely to compress margins for sugar mills.

“As far as sugar-based ethanol is concerned, the investments will not be all that good. So, my take is that the industry has put in almost something like Rs 35,000 to Rs 40,000 crore in building up the ethanol capacity. And it was largely on the strength of the incentives being given by the government and the trust,” the top executive highlighted.

According to Chaturvedi, the price realisation from ethanol currently stands at approximately Rs 37 per kilogram. This is considerably lower than domestic sugar prices, which are hovering around Rs 39/kg in Maharashtra and Karnataka and as high as Rs 40-41/kg in Uttar Pradesh.

This price disparity is likely to force a strategic pivot. "The sugar industry might now make more of sugar and less of ethanol," he noted.

However, this shift carries its own set of risks. With a big harvest expected in the second half of October, an increase in sugar production could lead to a supply glut, depressing domestic prices. 

“So, you would probably have a much larger sugar availability and that could be a little bit of a dampener as far as the sugar values are concerned. But then at the end of the day, the industries will have to probably take a call based on what works best for them,” he concluded.