Economy

‘Higher ethanol blending won’t hit liquor industry’

Harish Damodaran New Delhi | Updated on November 25, 2017 Published on June 24, 2014

M Manickam, Vice-Chairman, Sakthi Sugars

States should allow direct conversion of cane juice to alcohol, says Sakthi Sugars’ Manickam





The move to double ethanol blending in petrol to 10 per cent will neither affect alcohol supplies to potable liquor makers nor the revenue interests of State Governments, according to M Manickam, Vice-Chairman of Sakthi Sugars Ltd and former President of Indian Sugar Mills Association (ISMA).

“Even if ethanol or spirit prices rise to ₹50/litre, it would hardly make a difference when Indian Made Foreign Liquor is selling at roughly ₹3,300 for every case of 48 bottles of 180 ml each,” noted Manickam.

Since whisky, rum or brandy typically has 42.5 per cent alcohol content, a ₹3,300/case rate works out to nearly ₹900 a litre in terms of rectified spirit.

“Liquor makers can easily absorb spirit prices rising from ₹35-40 now to ₹50/litre,” he said.

Potable flows

Nor would supplies to liquor units – and, by extension, excise revenues of States – be impacted if sugar mills were allowed to produce alcohol/ethanol directly from cane juice.

Currently, alcohol is produced from molasses which contains fermentable sugars that cannot be economically recovered by mills. For every tonne of sugarcane that is crushed, mills produce 95 kg of sugar and 45 kg of molasses yielding about 10.8 litres of ethanol.

But if the mills were to use the entire juice from the cane for fermenting into alcohol, it would produce zero sugar and about 72 litres of ethanol for every tonne.

“You can, then, increase supply of alcohol by permitting mills to produce directly from cane juice instead of only through the molasses route. But for that to happen, ethanol prices would also have to go up,” Manickam said.

Sugar-ethanol equation

Mills are now realising around ₹32/kg of sugar. “At this rate, you need an ethanol price of ₹49.67 a litre to make the total revenue from 72 litres (₹3,576.46) equal to that from 95 kg of sugar (₹3,040) and 10.8 litres of ethanol (₹536.46),” he said.

Manickam claimed that a ₹50/litre price for ethanol wasn’t high when petrol is retailing at ₹75, though the latter is inclusive of various taxes.

The price that oil marketing companies pay for petrol to refineries is below ₹45 a litre on a landed cost basis.

“By giving ₹50 a litre for ethanol, the Government will at the most forgo some tax revenues. But it is a cost worth bearing for an industry that pumps back most of its revenues to farmers and the country’s rural economy,” Manickam said.

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Published on June 24, 2014
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