How ethanol can save sugarcane farmers

Subject: Economy

Section: External Sector

Context- The diversion of sugarcane to ethanol production could be a win win for both farmers as well as for the energy security of the country.

Concept-

This season’s drought in Brazil aﬀected sugar production and hence Indian sugar is in demand.
But this situation will not remain the same next year and millers will have to pay farmers the full price of the cane, even if prices come down in the market.
The sugar industry will collapse if the same amount of sugar cane and sugaris produced next year.
The government insists that only ethanol can save the sugarcane industry and farmers.

Contribution of States:

UP, Maharashtra and Karnataka contribute 75-80 percent of sugarcane in the country.

Ethanol requirement:

The government has launched the EBP Programme, wherein, Oil Marketing Companies (OMCs) sell petrol blended with ethanol up to 10 per cent.
Of the total existing ethanol production capacity of 834.7 crore litres in India, two largest sugarcane producing States, Uttar Pradesh and Maharashtra account for 50 per cent capacity.
Under the Ethanol Blended Petrol (EBP) programme, these States have achieved blending of about 22 percent of the total ethanol supply of 113.2 crore litre in 2021-22.
According to the government, due to several supplies and demand side interventions since 2014, ethanol blending quantity has improved from 38 crore litre in Ethanol Supply Year 2013-14 to 302.3 crore litre in ESY 2020-21.
The average ethanol blending percentage has also increased from 1.53 per cent to 8.1 per cent in the corresponding period.
US, Brazil and Thailand have ﬂexi fuel vehicles. In Brazil, petrol: ethanol ratio is 53:47. In some States, the ratio is even 35:65.

states with high ethanol production

Major supplier:

The NITI Aayog report on ethanol blending has estimated an ethanol demand of 1,016 crore litres in India based on expected vehicle growth.
The sugar industry could be a major player in ethanol supply.
According to the Indian Sugar Mills Association (ISMA), if India is a structural surplus sugar producer, it needs to export regularly.
High cane prices make Indian sugar manufacturers uncompetitive and dependent on government subsidies for exports.
With export subsidies not possible after 2023 (as per WTO), Indian mills will have to deal with a formidable problem.
ISMA says that higher sugar production is due to signiﬁcantly higher yields per hectare as also higher recovery.
The area under sugarcane has not seen any signiﬁcant increase in the last few years.
The higher yields and recoveries are due to better seed varieties and timely application of fertilisers and water, including good rainfall last year.
Diversion of surplus sugar into ethanol will improve liquidity and checks the fall in sugar price.