Maharashtra Ethanol Producers Face Financial Crisis Amid Procurement Restrictions
Maharashtra's ethanol industry warns of severe financial repercussions due to new procurement guidelines limiting feedstock options.
New procurement guidelines restrict ethanol production from key sugarcane feedstocks.
Industry estimates suggest nearly ₹40,000 crore in investments could be jeopardized.
Producers are seeking government support to adapt distilleries for multi-feedstock processing.
Ethanol producers in Maharashtra are sounding alarms over potential financial turmoil following the recent restrictions imposed on the procurement of ethanol derived from sugarcane juice, syrup, and B-heavy molasses. The new guidelines, announced by oil marketing companies on October 16, will take effect for the supply year starting November 1, 2023, and are seen as a significant threat to the viability of ethanol production in the state.
The restrictions aim to safeguard sugar availability, allowing only C-heavy molasses as a permitted feedstock. However, industry representatives argue that relying solely on this material is economically unfeasible given the current market prices. This shift could leave substantial distillery capacities underutilized and place considerable financial strain on producers who have invested heavily in expanding their operations in response to government incentives aimed at increasing ethanol blending in petrol.
Industry insiders estimate that investments nearing ₹40,000 crore in ethanol manufacturing are at risk due to these changes. A leading cooperative sugar mill chairman noted that India has an annual ethanol production capacity of about 2,000 crore litres, with Maharashtra's distilleries contributing significantly to this figure. The cooperative sector has invested heavily in distilleries, with costs ranging from ₹50 crore to ₹135 crore for establishing facilities capable of producing varying daily outputs.
The procurement changes complicate planning for the upcoming crushing season, with the Maharashtra government projecting around 99 million tonnes of sugarcane available for processing in the 2026-27 season. The forecast includes a diversion of 1.5 million tonnes of sugar for ethanol production, which is now uncertain due to the new guidelines. Harshvardhan Patil, chairman of the National Federation of Cooperative Sugar Factories, emphasized the substantial financial commitments made by producers based on previous government policies.
As the industry grapples with these challenges, cooperative mills are urging the government to provide assistance in converting their distilleries to multi-feedstock operations. This adaptation would enable them to process maize and other grains alongside sugarcane, allowing for year-round ethanol production. Without such support, the financial viability of many producers hangs in the balance, with potential implications for the broader economy and agricultural sector in Maharashtra.
