Ethanol making capacity will swell if there are incentives: ISMA D-G

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prices at mill gate and retail outlets will remain at the levels seen in recent months, benefiting all stakeholders, says Abinash Verma, director-general of the Indian Mills Association, tells Kunal Bose. Also, that the best way to tackle the bumper cane crop expected in 2018-19 will be to enhance the industry's ethanol making capacity. Edited excerpts:

Except for Tamil Nadu, again a victim of drought, the other major producing states are to record big output gains in the new season, starting October. What, according to you, is the supply and price outlook?
Official figures show that in the past seven months, retail prices remained between Rs 42 and Rs 44 a kg, helping all stakeholders. After a major setback in production to 20.29 million tonnes (mt) in 2016-17, which led to import of 500,000 tonnes in April, the government is expecting output to rise to 25.1 mt in 2017-18, with Maharashtra and Uttar Pradesh set to score major gains. Tamil Nadu continuing to remain under a severe dry spell will suffer a major setback in production for a second year in a row.

Is the industry fear of price fall unfounded?
Let me explain why the mill gate price will continue at Rs 36-37 a kg and the retail consumer will get at the price she is paying over the past seven months. The new season kicks off with inventory of around four mt, to make the total availability for 2017-18 at 29.4 mt, including the 300,000 tonnes of recently allowed import that are to arrive.

Factory sale will routinely rise by 2.3 per cent to 25.06 mt. This will again leave stocks of around four mt at the 2017-18 season, ending September. The industry has been able to convince the government that factories in major producing states are starting cane crushing in October itself, not in November as in the past, benefiting from growing early-season high-yielding varieties on an increasingly rising scale. This serves the purpose of keeping market price of the sweetener steady, by maintaining the season's opening stock at four mt, not 7.5 to over nine mt as was seen in the past.

Unpaid cane bills periodically running into thousands of crore cause great distress to millions of farmers. What is the way out?
The industry is starting the new season with almost a clean slate. This has become possible because of the right kind of mill gate price that factories are getting of late. If factories continue to get Rs 36-37 a kg at the mill gate, they will be able to settle cane bills in the prescribed time.

Ingenuity of the industry and government in tackling a big surplus will come for a test during 2018-19, when the country's production could climb to a record 30 mt. Have you started making a plan to cope with that?
No doubt, production in 2018-19 will be anything between 28.5 and 30 mt. I'm expecting Maharashtra's production to rise from a low of 4.2 mt in 2016-17 to an estimated 7.4 mt in 2017-18 and then to nine mt next year. I shall not be surprised if UP production goes to 10.5 mt in 2018-19, from an estimated 10.15 mt in 2017-18. Karnataka, a victim of scanty rain for consecutive seasons, could make four mt in 2018-19.

You want to know if the country will be found ready to tackle the 2018-19 surplus. The best option is to see that the industry's capacity to make ethanol is rapidly enhanced. Of the 530 factories, only 128 have built capacity, to make around 1,750 million litres (ml) of ethanol a year. The country also has 33 standalone distilleries, with annual ethanol producing capacity of 480 ml. The industry hasn't done badly in 2016-17 and many factories will be willing to install ethanol units downstream. They are waiting for the government to announce clear policy guidelines and incentives.

Remember there is scope for reducing production by as much as two mt by producing 1,200 ml of extra ethanol. factories can do this by processing B-heavy molasses, richer in content.

What about export in a season of big surplus?
That will remain an option. In the past, the country sold large quantities in the world market. We exported close to five mt in 2007-08. There are ways to incentivise export. But, in no case, starting now, should the country allow any further import.

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