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HomeMolassesGovernment May Consider Export Levy on Molasses to Boost Ethanol Production

Government May Consider Export Levy on Molasses to Boost Ethanol Production

India presently does not impose an export duty on molasses, which is a by-product derived from the process of refining sugarcane into sugar. Molasses serves as a crucial component in the production of ethanol, a biofuel.

New Delhi: The Union government is contemplating the imposition of a 50% duty on molasses exports to enhance supplies for India’s ethanol-blended petrol initiative, reveal sources familiar with the matter. As per information from the Mint website, the proposed export levy on molasses, a key ingredient in ethanol production, is part of efforts to meet the target of 20% ethanol-blended petrol by 2025-26, up from the current 12%.

India, currently the world’s largest molasses exporter, contributes about 25% to global trade. The potential export duty is seen as a measure to address the shortage of sugarcane caused by erratic monsoon rains, prompting considerations to discourage molasses exports.

Efforts to secure a robust domestic supply of molasses for ethanol production have intensified following recent restrictions on sugar exports and temporary directives to halt the use of cane juice for biofuel, which was later reversed. The proposed 50% export duty, previously suggested at 30% in September, could play a pivotal role in boosting the availability of molasses for ethanol production.

The decision on the export duty is expected in January, with industry associations such as the National Federation of Cooperative Sugar Factories Ltd advocating for restrictions on molasses exports. The proposal emphasizes the need to utilize all C-heavy molasses for ethanol production, crucial for achieving the 20% blending target. Industry bodies have suggested substantial customs duties or a complete ban to secure the necessary ethanol production capacity.

As of November 30, India’s ethanol production capacity stood at approximately 13.8 billion liters, with 8.75 billion liters based on molasses and 5.05 billion liters on grain. To achieve the 20% blending target, a total ethanol production capacity of 17 billion liters is required by 2025-26, with nearly half expected from the sugar sector.

The weak monsoon in the current year has led to a sugar production shortfall, impacting diversion for ethanol production. Despite challenges, industry experts acknowledge the government’s supportive ethanol policy for ensuring price stability and addressing supply fluctuations.

Queries sent to the commerce and food and public distribution departments remained unanswered at the time of press. Industry stakeholders, including the National Federation of Cooperative Sugar Factories Ltd, the West Indian Sugar Mills Association, and the South Indian Sugar Mills Association, have expressed concerns and proposed measures to safeguard ethanol production goals.

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