As the government of India has removed the cap on sugar diversion for ethanol and after considering the ethanol diversion of four million metric tonne (MT), the net sugar production is expected to witness a decline to 29.3 million MT in Sugar Year 2025 (SY2025). The Indian Sugar Mill Association (ISMA) projects gross sugar production to fall to 33.3 million MT in SY2025.
The report by Icra has stated that removing the cap on sugar diversion along with allowing FCI rice to ethanol distilleries will lead to a healthy increase in distillery volume. The report noted that the ethanol production capacity has risen to 1,589 crore litres for the current fiscal.
In order to achieve the target of 20 per cent blending by 2025, the country needs to have around 1,700 crore litres of ethanol production capacity by the end of the current year. The report stated that to achieve this, the plants need to operate at 80 per cent efficiency as well. In July 2024, India managed to achieve an ethanol blending ratio of 15.8 per cent.
As the grain-based distilleries have been allowed to participate in the e-auctions by the food corporations for rice procurement of up to 23 lakh MT by the Department of Food and Public Distribution (DFPD), this is expected to support the growth in ethanol blending. In addition, this will also drive the profitability margins of multi-feed or grain-based distilleries, as per the report by Icra.
Icra, in its report, has expected that the developments have improved the prospects of integrated sugar mills as they are likely to help curtail the closing sugar stock for the sugar year 2025, thereby keeping the prices of sugar at a reasonable level. However, the challenges of ethanol availability across states and the availability of proper infrastructure are likely to have an impact on the 20 per cent blending targets.
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