Ethanol Industry Faces Shift as Government Prioritises CHM-Based Production

ENA Sectors 2025-01-30 13:07:35 New Delhi, Jan 30 (KNN) In a move that could reshape India's ethanol industry, the government on Wednesday raised the price of ethanol derived from C-Heavy Molasses (CHM) by Rs 1.69 per litre to Rs 57.97 per litre. However, ethanol prices derived from B-Heavy Molasses (BHM) and Sugarcane Juice (SCJ) remain unchanged for the second consecutive year at Rs 60.73 per litre and Rs 65.60 per litre, respectively. This decision, according to a report by Systematix Institutional Equities, highlights a government preference for CHM and grain-based ethanol over BHM and SCJ as feedstocks. The price revision is expected to boost margins for distilleries utilizing CHM, while companies relying on BHM and SCJ could continue to face margin pressures. This is particularly concerning given the government's earlier decision to raise sugarcane prices by 3-5 per cent last year, which has increased production costs for ethanol made from these sources. Market expectations had anticipated a broader price hike of Rs 1.8-2 per litre for all ethanol feedstocks, including grain-based ethanol. However, no such announcement was made, reinforcing the notion that government incentives are shifting away from BHM and SCJ. The impact of this policy shift could be significant for ethanol producers, particularly those who have expanded distillery capacities for BHM and SCJ-based ethanol. With unchanged pricing for these feedstocks, new distillery facilities could struggle with lower utilization rates. Further reinforcing this strategic shift, the government has issued a fresh ethanol procurement tender of 1.2 billion litres for supply between February 15 and July 31, 2025. Notably, this tender is restricted to ethanol derived from CHM and grain-based sources, signalling a clear preference away from BHM and SCJ. As ethanol economics shift, sugar mills are expected to focus more on sugar production, especially given the improved profitability of sugar sales. Sugar prices have risen from Rs 37-38 per kg in December 2024 to Rs 39-39.5 per kg in January 2025 following the announcement of 1 million tonnes of sugar exports. This trend could lead to a recalibration of ethanol production strategies, with mills prioritising sugar output over BHM and SCJ-based ethanol. The evolving policy landscape suggests a potential realignment in Indias ethanol sector, with CHM and grain-based ethanol likely playing a more dominant role in the years to come. (KNN Bureau) 40841 https://knnindia.co.in/news/newsdetails/sectors/ethanol-industry-faces-shift-as-government-prioritises-chm-based-production 2025-01-30 13:07:35 knnindia.co.in Ethanol Industry Faces Shift as Government Prioritises CHM-Based Production