Atul Chaturvedi, Executive Chairman at Shree Renuka Sugars sees no reason why oil marketing companies (OMCs) will give preference to co-operative mills over private companies for ethanol purchase.
“Cooperative mills have invested, and so has the private sector. So it should be fair and square for both sectors,” he said commenting on a CNBC-Awaaz source-based report that suggested that OMCs are likely to prioritise cooperative sugar mills for ethanol purchases, a shift from earlier practices favouring mills with long-term agreements.
The report also stated that the ethanol price hike is likely to be limited to ₹1–1.5 per litre, much less than the ₹2–2.5 per litre demanded by sugar mills. Chaturvedi said a smaller than expected hike will be very disappointing for the sugar sector.
“We were expecting that the difference between maize ethanol, which is currently priced at around ₹71.86 per litre and cane juice ethanol, will be bridged this time around,” he noted.
At present, ethanol produced from cane juice is priced at ₹65.61 per litre, while the prices for ethanol derived from B-heavy and C-heavy molasses are ₹60.73 and ₹56.28 per litre, respectively.
Ethanol prices have remained unchanged since the 2022-23 cycle, which runs from November to October each year.
The current market capitalisation of the company is ₹8,571.43 crore.
These are the edited excerpts of the interview.
Q: Let us talk about the pricing bit because after lifting the restrictions on ethanol production, the industry was optimistic about a hike in ethanol prices. But now sources seem to be suggesting that the price hike could be lower than anticipated. According to you, what was the hike that you have proposed and what are you hearing about what may come?
A: We have been hearing about ethanol price increases since September, but somehow it has not seen the light of the day, and now your sources are saying that the increase could be only marginal, at around ₹1-1.50 per litre or somewhere around that.
We were expecting that the difference between maize ethanol, which is currently priced at around ₹71.86 per litre and cane juice ethanol, will be bridged this time around. We are still hopeful, because we have not heard the final word on what the new ethanol prices would be.
But if it is ₹1.5 per litre or thereabouts, it will be a big disappointment as far as the sugar sector is concerned.
Q: Assuming it comes at ₹1-1.5 per litre, what would be the margins? Will the operations be viable, and what would your profitability look like?
A: At the current prices, what realisation we get from ethanol, equivalent to sugar, is anything between ₹36-36.5 per kilogram (kg), and if it is ₹1-1.5 per litre, you would probably see returns from sugar equivalent would probably go up marginally by about ₹1. Which means it could go up to ₹37.5 per kg or thereabouts.
But the industry will continue to not do well, if the increase is only marginal, and there is no reason why maize ethanol should be priced at around ₹72 per litre.
Q: What is the total amount of tendering that has happened from the OMCs and what is the broad breakup between cooperative mills and private companies currently?
A: It will be difficult for us to put a number on what the co-operative mills have supplied, but we are also hearing on your ticker as well that there is some move that the cooperative mills would be given preference over the private sector. I see no reason why that should be the case, because cooperative mills have also invested, and so have the private sector. So it should be fair and square for both sectors, and there is no reason why you should differentiate between cooperative and private.
A sugar mill is a sugar mill, whether it is a private or a cooperative one. So let us hope this does not happen because in any case, the private sector has also invested quite a lot in putting up, and scaling up the distilleries in the country
