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Sugar industry protests OMC ‘injustice’ to them

One of the main objections that the industry has raised is the preferential treatment given by the OMCs for ethanol produced from maize as a feedstock over sugarcane.

Written by Parthasarathi Biswas | Pune |
Updated: December 10, 2021 8:19:29 am
Ethanol has been a game changer and equity earner for the sugar industry and had helped them to clear their cane dues on time. (File)

Officials of the sugar industry have written to Prime Minister Narendra Modi complaining about what they described as “injustice” meted out to them by the Oil Marketing Companies (OMC)s. The letter comes at a time when cane dues in poll-bound Uttar Pradesh are becoming a headache for the ruling BJP.

In the letter, a copy of which is with The Indian Express, Niraj Shirgaonkar, president of India Sugar Mills Association (ISMA) has protested against the decision of the OMCs to prioritize ethanol from maize as feedstock over cane juice in terms of supply of ethanol. The genesis of the problem lies in the Expression of Interest (EOI) floated by the OMCs on August 27 this year which has rattled the industry. The industry has taken up this issue over the last many months but there has been no response from the OMCs. The letter to the Prime Minister follows months of deadlock even as the Ethanol Marketing year (December to November 2021-22) has started.

One of the main objections that the industry has raised is the preferential treatment given by the OMCs for ethanol produced from maize as a feedstock over sugarcane. Ethanol – the fuel additive – is produced as a byproduct of sugar production or from fermentation of carbohydrates in the feed stock obtained from maize, rice etc. The government’s policy has been to incentivise ethanol produced directly from cane juice or sugar syrup as they have been the highest selling price. However, the industry in its letter has protested against the decision of the OEMs to assign the highest point to ethanol produced from maize-based feedstock while that from cane has been given the lowest points. This, the letter pointed out, was against the spirit of the ethanol program unveiled by the Centre in 2018.

The OMCs had floated an addendum/corrigendum to the EOI of August which had given preference to new ethanol plants over the existing ones in supply of ethanol in the ESY 2021-22. Only mills which sign long-term supply contracts as per the tender would be given preferential treatment over other existing suppliers. The industry said the purpose of August EOI was to enable new units to get loans under the special interest subvention scheme unveiled by the Centre in its National Bio Fuel policy of 2018. Many of the existing suppliers were debarred/made ineligible over newer plants for bidding for the tender.

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The above EOI has allocated 648 crore litres of ethanol production capacities across the country. However, the industry pointed out that this was done without taking into consideration the availability of raw material. As a result, states having sugarcane maize got lower allocation as compared to states with no raw material. Uttar Pradesh, Maharashtra and Karnataka which together produce 70-80 per cent of the sugarcane and therefore ethanol in the country, have been allocated lower than their production capacity in the tender. The sudden change in policy has put a question mark in the minds of sugar mills who have invested or have taken loans to start ethanol production capacity.

In the ongoing Lok Sabha session, the Centre has talked of Rs 4,445 crores as pending dues with Uttar Pradesh leading the list with Rs 3,752 crores. Ethanol has been a game changer and equity earner for the sugar industry and had helped them to clear their cane dues on time. Cane dues and failure of mills to pay on time can become a poll plank for the Opposition in the upcoming UP polls.

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First published on: 09-12-2021 at 06:39:07 pm

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