The sugar industry expects a potential increase in ethanol prices to around ₹72 per litre, which would boost sector revenues and margins, said Atul Chaturvedi, Executive Chairman of Shree Renuka Sugars, in an interview with CNBC-TV18.
Currently, ethanol produced from cane juice is priced at ₹65.61 per litre, with ethanol from B-Heavy and C-Heavy molasses priced at ₹60.73 and ₹56.28 per litre, respectively.
Sugar stocks surged on September 27 following comments from Food Minister Pralhad Joshi, who hinted at possible ethanol price hikes for the 2024-25 season.
The minister also suggested a review of the minimum selling price (MSP) of sugar and a reassessment of sugar exports.
Chaturvedi said that aligning ethanol prices with those made from maize would help improve distillery capacity utilisation and overall revenue for the sector.
This is the verbatim transcript of the interview.
Q: Earlier, the government lifted restrictions on ethanol production. Now the buzz is that there could be an increase in ethanol prices. What are the expectations with respect to price hikes here?
A: We are expecting a moon. Last year, in December, when the government banned the making of ethanol from cane juice and B-heavy molasses, it came as a bolt from the blue, and in fact, recently, about a month or so back the government came up with the notification that now the ban has been lifted.
So we were expecting some action to happen as far as price revision and opening up of this cane juice ethanol is concerned. In fact, the other day at the ISMA conference, the minister said that they are seriously working on this, and we can hope to have some price revisions coming before the start of the crushing season.
Q: How much are you expecting this revision to be, and what could the resultant impact on your revenue and margin be because of this revision?
A: We don’t know what the revision would be, but the demand of the industry has been that there is no reason why ethanol made from maize be purchased at close to ₹72 and from cane juice, which has a pretty good ecosystem in place, and which had been at the forefront of this ethanol campaign, why should it remain at ₹60 or B-heavy at about ₹65. What we are expecting is it should be closer to about ₹72 or closer to about where maize ethanol is. But we still don’t know what the number would be.
In terms of the impact on our revenues, last year was a disaster in terms of distillery capacity utilisation. Normal utilisation is in the region of about 20 crore liters. It was about just about four crore liters or thereabouts.
Q: So four crore liters is what you did last year. Then what is the target for this year? How has the ramp up been in ethanol production? The earlier indication was 20 crore plus liter production this year is the is that on track?
A: I am sure we should be in a position to utilise our capacity to the extent of 100% or more. And if and when the government comes up with this revision in prices, which we are expecting, should be there in the first week of October, because the crushing season is going to start in the later part of October. So I think it should be coming now.
There is no reason why we should not be in a position to fully utilise capacity, which is close to about 1,250 kiloliters (KL). And when we are running on juice, it becomes something like 1,300 to 1,400 KL per day.
Q: If we get that math right, assume this closer to 70 sort of revision comes by in October itself. Your target for this year is 20 crore liters. Assuming you have done about 10 in the first half of this year already, you are left with around another 10 to do in the remainder of this year. So 10 into 12 would give you an additional revenue of ₹100 to 120 crore. Would that be the correct way to assess this?
A: I won’t say that would be the correct way to assess it. The revenue would depend on how much of the ethanol is physically moved out, because that alone is going to impact our sales. But on a rough basis, our contribution from ethanol, we expect to be about 40% of our total revenue, and our revenue stream is from two sources. One is the port-based refineries, and the other is the crushing plant. A rough number I am giving you is from the crushing plant – export from the refinery is a separate subject altogether.
