Sugar Study by Vivek Saraogi, MD, Balrampur Chini Mills

Ethanol

When cane is crushed, we get bagasse which is the powdered crushed cane, molasses is a by-product of this process. Molasses is used in a distillery. It is distilled and dehydrated to get alcohol. First stage of alcohol we get is rectified spirit (96% purity) used in medicines, sanitisers and pharmaceuticals (all medical applications). Next stage of alcohol is ENA (Extra Neutral Alcohol) which is a better version of the rectified spirit. ENA is bought by all liquor companies (potable applications). Then if you dehydrate and refine the molasses more, you get ethanol which is rectified spirit (99.8% purity). Ethanol is physically blended with petrol. It can simply be poured into the petrol tank and it would be blended in the ratio of 1 litre of ethanol for every 9 litre of petrol. Mix varies from 4-10% of blending.

To make domestic sugar companies viable, you have to provide right selling price for sugar sale, ethanol sale and power price as subsidy. Cane price is the main raw material cost. For OMCs, pricing is done by getting blended cost of ethanol and petrol and charging the same to their customer. Lower crude prices will reduce ethanol in the mix and vice versa. Thus, price of crude affects the mix and eventually demand for ethanol.

Due to lack of distillation capacities in many states, blending here is still 5% while the ones with good capacity are blending at 10%. So national average blending is 5% currently.

Government now allows sugar companies to make ethanol directly instead of getting molasses through the sugar manufacturing process and then making ethanol.

B Heavy – Molasses loaded with sugar. So, this is the sugar being converted into ethanol. Government given a different price for this which is Rs.10 higher than normal molasses (by product) because you are sacrificing converting this into sugar. This sugar would be otherwise exported and subsidy could be claimed by company. What government saved in subsidy, it provided by giving higher prices and increasing mix.

When sugar prices are low, companies make more B Heavy, when sugar prices are higher, they make more sugar.

Government put restriction on the price below which sugar can be sold and quantity that can be sold. Surplus can be exported.

- Vivek Saraogi, MD, Balrampur Chini Mills via NBC Webinars