The Hindu Business Line : Mills saddled with excess molasses, alcohol

Brimming stocks
When sugar output is scheduled to cross 23 mt, it would generate some 2,330 million litres of alcohol.
Domestic demand at the most pegged at 1,700 million litres.
TN to close molasses stocks in 2006-07 at seven lt, which would be twice the storage capacity of 3.5 lt in the State.

New Delhi , Aug 6

With sugar production recovering this season (October-September) and slated to go up further in 2006-07, mills are facing a new problem of disposing surplus molasses and alcohol. During 2005-06, total sugar output is estimated at 19 million tonnes (mt).

Alcohol output

The corresponding production of molasses at this level — 100 tonnes of cane crushed yields an average 10 tonnes of sugar and 4.5 tonnes of molasses — works out to 8.55 mt.

And since one tonne of molasses gives 225 litres of alcohol, it means around 1,925 million litres.

As against this, total domestic consumption is estimated at 1,625 million litres, of which 925 million litres would go for potable purposes and 700 million litres to the chemical industry (including 50 million litres by units making ayurvedic and other products).

Thus, even without accounting for imports or alcohol from grains and other substrates, there would be a surplus of 300 million litres.

Surplus

It will be worse in the coming season, when sugar output is scheduled to cross 23 mt, which would end up generating some 2,330 million litres of alcohol. With domestic demand at the most pegged at 1,700 million litres, it would leave a surplus of 630 million litres.

A far cry from 2003-04 and 2004-05, when sugar production ruled at 13.55 mt and 12.69 mt, and alcohol availability from local molasses hovered around 1,300 million litres.

It led to imports of 400 million litres in each of these seasons. Reliance Industries alone had to import about 50 million litres to feed its mono-ethylene glycol (MEG) facility at Kurkumbh (Pune) in Maharashtra, where the slump was even more pronounced.

Reversal

Now, it is the reverse. Only last week, Bajaj Hindusthan Ltd (BHL), the country's top sugar producer, is learnt to have sent a five million litres shipment to Korea and Japan, worth around Rs 14 crore at $600 per tonne free-on-board.

Ex-distillery rates in Uttar Pradesh are currently ruling at about Rs 17.50 per litre, compared to Rs 25-26 at this time last year. At $600 per tonne and adjusting for Rs 3 per litre freight, the realisations from exports would be over Rs 25 per litre.

The surplus scenario is even more in Tamil Nadu, where mills are expected to close this season with molasses stocks of four lakh tonnes (lt). With production to touch 11 lt against consumption of eight lt, the closing stocks in 2006-07, at seven lt, would be twice the storage capacity of 3.5 lt in the State.

No wonder, ex-factory rates of molasses in TN have slumped to Rs 500 per tonne. This is against Rs 2,500-3,000 per tonne in UP, where there are more distilleries.

"At current ex-factory rates of Rs 500, Central excise of 750 and 20 per cent sales tax, the effective tax incidence on molasses comes to 200 per cent!", the Managing Director of Sakthi Sugars, Mr M. Manickam, noted. Keeping in view the surplus availability, the TN Government has only recently allowed mills to export up to 1.9 lt of molasses.