Alcohol as a Renewable Feedstock

Alcohol for use in transport fuel is arousing interest in India for the last few years, with ethanol being considered as a valuable oxygenate in fuel. There are many arguments for and against the use of ethanol as a fuel mixture. Various end-use segments fear that with this program ethanol availability would be affected. This fear is not unfounded because even if there is surplus ethanol available, the creation of a new market always alters its demand-supply balance.

The ethanol program in India should also be combined with the flexibility to use sugarcane juice to manufacture alcohol. This will solve the twin issues of mounting sugar stocks and ethanol availability. This practice is common in Brazil.

Since India is among the largest producers of sugar in the world and therefore among the largest producers of molasses and ethanol, ethanol would always be comparatively cheaper here than any place else. In the past six years, molasses prices have been as low as Rs 50/ton, and as high as Rs 2,000/ton. But today, the alcohol industry is in a dire crisis. Molasses prices are highly volatile. The fall and rise in sugar production is amplified in molasses prices.

Uniform National Policy
Alcohol is largely produced in Uttar Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Gujarat and Karnataka. The oil refineries on the other hand are located in several other states. The prevailing tax and duty structure on alcohol, which is the basic raw material of the alcohol-based chemical industry varies in the states. Each state has its own policy regarding duties, levies, permits, interstate movement, export/import pass fee, etc This difference causes variations in the cost of alcohol, thereby causing variations in the prices of end-products in the states.

Pooling of molasses supply for the country as a whole would ensure better demand supply balance, and therefore lesser volatility and better industry viability. Currently, the ethanol-based industry is suffering due to the absence of a national policy. Each state has its own policy leading to localized surplus or deficits resulting in price instability and volatility.

Inter-state Movement
In addition, periodical imbalances within states and the economics of alcohol prices in states dictate the necessity of inter-state movement of alcohol. Even within our country, import and export fees are charged by various states for inter-state movement.

For any program using ethanol as a feedstock to succeed, there has to be a uniform national policy. Therefore unless state policies on molasses are rationalized and inter state movement made free, such a program would not succeed.

Recommendations
The following steps would ensure better availability of feedstock to the industry thus reducing volatility:

• A National Policy for molasses for industrial and fuel use should be encouraged
• Prevailing Sales Tax on molasses and rectified spirit varies across states. A uniform policy is required.
• Inter-state movements within the country carry ‘Export Pass Fees’ that varies in different states. Over and above this fee some states also levy an administrative fee. It is suggested that this export pass fee for sale within the country be removed.
• Permission should be granted to sugar mills to manufacture alcohol from cane juice

A Masters in Chemical Engg. from Cornell University, USA, followed by an MBA, he has been awarded the Annual Chapter Award for Scholastic Achievement from the American Institute of Chemical Engineers & the Proctor & Gamble Technical Excellence Award, to name a few.

Caption:
No Modvat benefit is considered. For outside states, pass fee and duties prevailing in the neighboring states are considered. The basic price of molasses is assumed at Rs 1,000 per ton.

Courtesy: Mr Samir Somaiya, Director, The Godavari Sugar Mill Ltd., Fazalbhoy Bldg, 45/47 Mahatma Gandhi Road, Fort, Mumbai - 400 001; Ph: 022-285 8430; Fax: 022-204 7297 Mr Samir S Somaiya is currently Managing Director, Somaiya Organo Chemicals Ltd, the Director of Godavari Sugar Mills, and Lakshmiwadi Sugar Factory Ltd.