Grain-based ethanol overtaking sugar not a concern: ISMA

Prashant Biyani, VP Institutional Equity at Elara Securities, said grain-based ethanol now contributes nearly 70% of production, while sugar’s share has fallen to 30% as higher feedstock costs hurt profitability.

Deepak Ballani, Director General of the Indian Sugar & Bio-Energy Manufacturers Association (ISMA), believes grain-based ethanol overtaking sugar-based ethanol should not be viewed as a negative for the sugar industry. Instead, both feedstocks are working together to support India’s ethanol blending programme and improve the country’s energy security.

India’s ethanol industry is entering a new phase where demand growth, rather than fresh capacity additions, will determine the sector’s future.

Industry experts believe both sugar- and grain-based ethanol producers have already created enough production capacity, and the next trigger will be higher consumption driven by the rollout of flex-fuel vehicles and higher ethanol blends

According to Prashant Biyani, VP Institutional Equity at Elara Securities, grain-based ethanol now accounts for nearly 70% of total production, while sugar’s share has fallen to around 30%. Earlier, the contribution was almost evenly split, but rising sugar feedstock costs without a corresponding increase in ethanol prices have reduced the attractiveness of sugar-based Balrampur Chini production.

Industry experts said there is little incentive for companies to add fresh ethanol capacity at present because existing facilities are not fully utilised. Ballani said, “Both grain and sugar combined, we have capacity almost 2,000 crore litres. However, the consumption is only 1,100-1,200 crore litres. So it doesn’t really make any sense for any mill to now have any more capacity on its and all, unless the existing capacity utilised.”

He added, many sugar mills have already set up dual-feed distilleries. These plants typically produce sugar-based ethanol during the crushing season, which lasts around four to six months, and switch to grain-based ethanol during the off-season. While this strategy offers operational flexibility, companies are not looking to add more capacity at the moment.

The industry expects ethanol demand to rise gradually as flex-fuel vehicles become more common. Maruti Suzuki recently introduced its first flex-fuel vehicle, while the government has also launched E85 fuel for such vehicles. Industry participants believe wider adoption of higher ethanol blends, and eventually E100, could significantly improve capacity utilisation over the coming years.

Flex fuel vehicle is a vehicle which has the flexible system and can take any blend of fuel from E20 to E100.

Among listed sugar companies, Elara Securities remains positive on Balrampur Chini. Apart from sugar and ethanol, the company is expanding into poly lactic acid (PLA), with its new plant expected to begin operations in the third quarter of this year.

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