“As far as exports in the current sugar season is concerned, we are expecting all-time high exports from India – minimum of 7.5 million tons and we will not be surprised if it touches around 8 million tons in the ongoing season,” says Pramod Patwari, CFO, Balrampur Chini Mills.
What are the prospects of ethanol considering Balrampur Chini derives almost 13% revenue from distillery business and almost 10 crore litres of ethanol has been produced already in the nine months of the fiscal? How big will the industry be in five to six years down the line?
It is very difficult to say where the industry could be five to six years down the line because we need to understand that we are still dependent on our feedstock on the weather conditions. Particularly in UP this year, due to inclement weather, the cane availability is on the lower side. That is one part.
As for where the industry is heading currently, we are at around 8.5% of blending. The government has mandated 20% blending by 2025-26 and in the ongoing ethanol year, which begins from December, we are expecting a diversion to happen around blending in the region of around 10%. With the kind of announcements which we have been seeing from the government with regard to launching of flexi fuel vehicles, next year definitely we will be on the verge of attaining a higher blending.
In FY22, OMCs had finalised tenders for about 385 crore litres out of which about 353 crores had been contracted till date. What is the growth outlook guidance looking like for entering into tenders with OMCs?
For the ongoing season, the requirement for 10% blending is 459 crore litres and as against that around 416 crore litres has been offered. The contracted is around 385 crore litres as rightly pointed out by you. We are looking at around 10% of blending this year in the season and so may be around 400 crore litres of supply from the sugar industry including the grain-based industry.
What is the update on your expansion programme – greenfield and brownfield? What is the update as well on the distillery business?
As far as our expansion program is concerned, it is well on track. We are expecting to commence our distillery capacities around November 2022. With the commencement of those distilleries we will have the installed capacity of around 35 crore litres but this will be available in FY24. For FY23, the available capacity depending on the time of commencement of the new operations will be around 23 crore litres. Of these 23 crore litres, we will use 2-2.5 crore litres for production of ENA and the rest we will dedicate towards production of ethanol.
Given that globally prices are rising as well and the currency has been weak, how are you looking at export opportunities for the sugar industry?
As far as exports in the current sugar season is concerned, we are expecting all-time high exports from India – minimum of 7.5 million tons and we will not be surprised if it touches around 8 million tons in the ongoing season. The value of Brazilian Real as well as the ethanol parity is a tailwind at this point in time. We are extremely bullish on exports from India.
What about the pricing trends? How do you see that shaping up for your international markets and for the domestic markets? Do you expect global sugar prices to continue to rise because globally sugar is still in deficit?
You are right. At the global level, we are still seeing a deficit of around two million tons and the projections that we are hearing for Brazilian production next year is at around 34 million tons. So there will be an opportunity to export from India.
As far as the pricing trajectory is concerned, if crude continues to remain at the elevated level. This will be an additional tailwind as far as the international raw sugar prices are concerned. On the domestic front. this is going to be a very interesting sugar season; we are going to witness an all-time high production, all- time high diversion of sugar into ethanol, best-ever demand as well as the highest ever exports.
On this basis, we are still expecting to draw around one million ton minimum of inventory from the opening stock which was around 8 million tons.
How have the realisations been? What has been the average realisation? Have they been impacted given that costs have gone up?
The current realisation is around 34.5 on an average ex factory in UP which was around 32.5 for the full year FY21. There is an increase in realisation but the cost has also gone up. The cane price in UP went up by Rs 25 per quintal. The availability of cane and recoveries are on the lower side because of the inclement weather. All these factors have really pushed up the cost side also.
The above news was originally posted on economictimes.indiatimes.com
