Major sugar mills in India are facing a double whammy this season

19-Dec-2024 10:42 AM

Major sugar mills in India are facing a double whammy this season
The situation for major sugar mills in India highlights significant challenges in the ethanol market due to government policies. Here's a summary of the key points:
Government Priority for Cooperative Mills:
The government has instructed oil marketing companies (OMCs) to prioritize ethanol procurement from government-run cooperative sugar mills.
This may limit procurement opportunities for private sugar mills, reducing their share in ethanol sales.
Modest Ethanol Price Hike:
The government is contemplating a marginal increase in the ethanol procurement price (₹1-1.50 per litre), which is below the ₹2-2.50 hike demanded by sugar mills.
Such a modest increase may strain the profitability of private sugar mills for which ethanol is a high-margin product.
Impact on Major Sugar Mills:
Companies like Shri Renuka Sugar, Bajaj Hindustan, Balrampur Chini, and Dhampur Sugar Mills may see reduced revenues and profitability due to these policy changes.
Ethanol Blending Programme (EBP):
Despite these challenges, the EBP aims to achieve a 20% ethanol blending target in petrol by 2030.
The initiative is designed to support the agricultural sector and reduce dependency on fuel imports.
These developments signal potential profitability pressures for private sugar mills, despite the long-term benefits of the ethanol blending initiative.