The government's decision to permit the use of E100 fuel in vehicles could go a long way in accelerating India's ethanol economy, but sugar producers will need higher ethanol prices before they can fully benefit from the opportunity, according to Atul Chaturvedi of Shree Renuka Sugars.
Speaking to NDTV Profit, Chaturvedi said the industry's biggest challenge remains the economics of ethanol production, despite recent policy support aimed at boosting ethanol adoption.
“The major issue as far as the sugar sector is concerned is that they are still struggling with very low price of ethanol,” Chaturvedi said.
The comments come after Union Minister Nitin Gadkari announced approval for the use of E100 fuel, paving the way for automobile manufacturers to introduce flex-fuel vehicles capable of running on up to 100% ethanol.
Pricing Remains the Key Concern
According to Chaturvedi, ethanol produced from sugar-based feedstocks is currently less remunerative than ethanol sourced from maize.
“Ethanol being sourced from the maize sector is closer to about Rs 72, and for the sugar sector, made from juice, it is around Rs 65,” he said. As a result, sugar mills may be reluctant to divert more sugar towards ethanol production if sugar prices remain attractive.
“If the returns from ethanol for the sugar sector are lower than sugar, then why would they make it?” he added.
Capacity Exists, Demand Does Not
The industry also faces a utilisation challenge. Chaturvedi said Shree Renuka Sugars' ethanol plants are currently operating at only around 40% capacity utilisation, assuming 300 working days annually.
Deepak Ballani, Director General of the Indian Sugar and Bio-Energy Manufacturers Association, echoed those concerns, noting that sugar-based distilleries across the industry are running at just 35-40% utilisation levels.
“Sugar industry has two basic problems. One is the ethanol pricing and another is the allocation,” Ballani said.
He added that sugar-sector allocations accounted for only around 28% of ethanol supplies last year, limiting utilisation levels.
While both executives welcomed the introduction of E100 and flex-fuel vehicles, they cautioned that the transition will be gradual and will require support from automakers and fuel retailers.
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