Govt imposes 50% duty on molasses exports

The government of India has imposed a 50 percent duty on the export of molasses, with effect from Thursday. 

It is hopeful that by restricting the exports of molasses, which is the by-product of sugar production and feedstock for making ethanol, domestic companies will have better access to the feedstock and achieve a 20 percent ethanol blending target by 2025 from the present 12 percent. 

India's ethanol production is facing a sharp decline from 2.36 billion litres in 2021 to nearly 1.3 billion litres in 2023, according to industry experts who track the sector.

Production of sugar, which contributes to the majority of ethanol production has been on the downswing with the National Federation of Cooperative Sugar Factories (NFCSF) stating that, the sugar production for the year 2022-23 has been the lowest since 2016-17.

(NFCSF)  has said Maharashtra and Karnataka which are India's largest sugar-growing states and contribute to 25 percent of global molasses production, are expected to record particularly sharp declines, on the back of subpar rains and low reservoir water levels in their major cane-growing geographies. 

While India has made decent progress to make the e20 blend currently available at close to 9,300 fuel stations as of date as per government data, the government needs about 10.16 billion litres of ethanol annually to reach close to 70,000  petrol stations by 2025, a study by Niti Aayog has estimated.

To mitigate this, the government of India is looking to diversify its ethanol production from other grains such as rice, maize, and damaged food grains from sugarcane to meet E20, or petrol blended with 20 percent ethanol, and this target has been advanced by five years to 2025.

In 2018 the government released its national policy on biofuels. Later in 2021, NITI Aayog followed it up with a roadmap for achieving targets under the policy.

According to industry estimates India's current sugarcane crop cultivation is s estimated to be 29-30.5 million tonnes, compared to domestic consumption of 27.5-28 million tonnes. In the 2022-23 season, India is estimated to have produced 32.7-32.8 mt of sugar after the diversion to ethanol.

Petroleum Minister Hardeep Singh Puri had informed that blending of ethanol into petrol has resulted in savings of over Rs 24,300 crore of foreign exchange in the supply year 2022-23 while state-run oil marketing companies saved about 509 crore litres of petrol, with an estimated net reduction of 108 lakh metric tonnes in carbon dioxide, the Union Minister said.

As of 30 November, India’s ethanol production capacity was about 13.8 billion litres. Of this, about 8.75 billion litres were molasses-based and about 5.05 billion litres were grain-based.