Introduction
The central government has taken a preemptive measure to prevent any stay order on its recent ban on using sugar for ethanol production in the 2023-24 supply year. The government has filed caveats in the High Courts of Bombay and Karnataka, seeking to be heard before the courts pass any order on the petitions filed by several sugar firms challenging the ban.
Background
The government had issued an order on December 7, 2023, prohibiting sugar mills and distilleries from using sugarcane juice or sugar syrup for ethanol production in the 2023-24 ethanol supply year (December-November). The order was issued under the Sugar (Control) Order, 1966, to ensure adequate availability of sugar for domestic consumption and to keep prices under check.
The order came in the backdrop of an estimated fall in sugar production in the 2023-24 marketing year (October-September) due to lower sugarcane yield in Maharashtra and Karnataka, the main producer states. Sugar prices had touched Rs 40 per kg in northern India by the end of the 2022-23 marketing year. The government later allowed diversion of 1.7 million tonnes of sugar for ethanol production in the 2023-24 marketing year to allay industry concerns.
Industry Reaction
The sugar industry, which had invested Rs 15,000 crore in the last three years to set up plants for green fuel, had expressed its displeasure over the “sudden ban” on the use of cane juice for ethanol. The industry body Indian Sugar and Bio-energy Manufacturers Association (ISBMA) had said that the ban would have an adverse impact on capacity utilisation of mills and put at “risk” their investment.
Several sugar firms had approached various courts seeking a stay on the government’s order. In the absence of a caveat, the courts could have passed a stay order without hearing the government’s side, according to an official.
Ethanol Blending Programme
The government has set a target of achieving 20 per cent blending of petrol with ethanol by 2025, as part of its Ethanol Blending Programme (EBP). The programme aims to reduce dependence on imported crude oil, enhance farm income and reduce carbon emissions.
The government has been encouraging sugar mills and distilleries to produce ethanol from various feedstocks, such as sugarcane juice, sugar syrup, B-heavy molasses, C-heavy molasses and grains. However, due to lower availability of sugarcane and grains, the ethanol production capacity has been underutilised.
Conclusion
The government’s move to file caveats in the High Courts is seen as a precautionary step to avoid any disruption in its EBP. The government has also assured the industry that it will review the situation after assessing the sugarcane crop and sugar production in January 2024. The industry hopes that the government will reconsider its decision and allow the use of cane juice for ethanol production in the next tender.