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The Centre’s decision to provide production subsidy of ₹4.5 per quintal of cane to sugarcane farmers may relieve the plight of sugar mills in some States, but will have a negligible impact on those in Tamil Nadu.
This is the outcome of an onerous condition to qualify for the subsidy. Mills which have a distillery unit attached to them – effectively most sugar mills in Tamil Nadu – will have to achieve 80 per cent of the ethanol production target mandated by the Centre.
EBP targetAchieving the EBP (Ethanol Blending Programme) target may not be easy for mills in the State, given that limits placed by the Tamil Nadu Government on the production of ethanol are far too low to meet the target of the EBP.
Sugar mills in the State are currently permitted to sell no more than 50 lakh litres of ethanol, which is barely eight days’ production. They have a cumulative distillery capacity of 6.25 lakh litres per day. The annual target under the EBP is way higher at about 20 crore litres.
Sugar mills in Tamil Nadu have been clamouring for a relaxation of the ethanol production cap. But the State government – which earns considerable revenues from the sale of liquor – seems to be keeping a tight cap on ethanol production to ensure that there is enough alcohol available, in the form of rectified spirit and extra-neutral alcohol, to cater to the demand from Indian-made Foreign Liquor (IMFL) manufacturers.
Tax regimeAt the same time, Tamil Nadu’s taxation regime has rendered its sugar mills uncompetitive – a double whammy.
The imposition of a 14.5 per cent value-added tax on alcohol has resulted in higher imports of cheaper alcohol from sugar mills in Karnataka.
The result; Tamil Nadu’s sugar mills are sitting on unsold inventory of alcohol. The average monthly alcohol inventory stood at 2.75 crore litres.
Will the State government now address the imbalance in demand and supply of alcohol and accordingly revise the ethanol permission for sugar mills? The industry has been seeking permission to produce more ethanol for a while now.
“Now, with the new subsidy scheme announced by the Centre, we are hopeful that the State government will announce measures that will enable sugar mills in the State to benefit from the subsidy scheme,” says Palani G Periasamy, President, South India Sugar Mills Association.
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