ISMA seeks upto Rs 20,000 crore budget support for advanced biofuels as sugar sector faces surplus, pricing stress

New Delhi [India], January 14 (ANI): The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has sought a budgetary outlay of Rs 15,000-20,000 crore to support advanced biofuel projects, including second-generation ethanol and sustainable aviation fuel (SAF), as the sugar industry grapples with surplus production, weak prices and constraints in ethanol diversion, said Deepak Ballani, Director General, ISMA.
"We have requested around Rs 10,000 crore for second-generation ethanol and about Rs 1,500 crore for SAF capacity, and overall an outlay of Rs 15,000-20,000 crore to support pilot projects and new technologies for the advanced biofuels," he told ANI in an exclusive interview.
ISMA has sought budgetary support funds for second-generation ethanol, green hydrogen and SAF to enable pilot projects, new technologies, equipment innovation, along with GST rationalisation this budget, he said.
"We want the government to rationalize GST on Flexi and strong hybrids. We want them to give some support fund, because sugar industry, sugar cane is a major feed stock for our advance for biofuel," he said.
The budget push comes at a time when the sugar industry is navigating what Ballani described as a challenging phase despite strong production. "The sugar industry is going through very challenging times," he said, noting that the current crushing and harvesting season is progressing well.
"As per ISMA estimates, we are heading for a very high production of sugar, almost 34.3 million tonnes, which is much better than last year," Ballani said. However, he added that higher production has intensified pressure on ex-mill prices, affecting mill viability.
Ethanol diversion, a key stabilising mechanism for the sector, has fallen short this year. "Ethanol diversion is very critical because it balances sugar stocks and helps ensure timely payment to farmers," Ballani said. "But this year, in cycle one tender, diversion has been limited to only 34 lakh tonnes, which is far below what was anticipated."
In volume terms, ethanol allocation this year stands at around 290 crore litres, compared with industry expectations of nearly 450 crore litres, Ballani said. "This creates an imbalance in sugar stocks and puts downward pressure on ex-mill prices," he said.
ISMA has also raised concerns over pricing. Ballani said ex-mill prices have started falling below the cost of production. "Prices at the level of cost of production are extremely important to maintain the economic viability of the industry," he said.
He pointed out that the fair and remunerative price (FRP) of sugarcane has increased from Rs 275 per quintal in 2018-19 to Rs 355 per quintal currently, nearly a 30% increase, while the minimum support price (MSP) of sugar has not been revised since 2018-19. "Based on today's cost of production, MSP needs to be increased to around Rs 40-41 per kg," Ballani said.
ISMA has also sought a revision in ethanol prices. "Around 70-75% of ethanol cost is raw material cost," Ballani said. "FRP has gone up by 16-17% over the last three years, but ethanol prices have not been revised, which is affecting distillery viability."
India has already achieved 20% ethanol blending (E20) five years ahead of the original 2030 target, Ballani said. However, surplus capacity remains a concern. "Total ethanol capacity today, across sugar and grain, is close to 2,000 crore litres, while E20 requires only about 1,100 crore litres," he said.
ISMA has called for a roadmap beyond E20, including higher blending levels, flex-fuel vehicles, ethanol-diesel blending and SAF. "We have submitted a roadmap prepared with Deloitte, and we are waiting for the government to come out with a comprehensive plan, especially for SAF," Ballani said, citing international mandates under CORSIA.
On exports, the government has permitted sugar exports of 15 lakh tonnes this season. Ballani said export contracts for 2-2.5 lakh tonnes have been signed so far, though shipments remain slow due to weak global price parity.
Domestic demand has also softened. "Last year consumption was around 281 lakh tonnes, and this year we expect around 285 lakh tonnes, which is a concern," Ballani said, adding that ISMA studies show demand growth of only 1-1.5% annually going forward.
To boost ethanol usage, ISMA has sought GST cuts for flex-fuel and strong hybrid vehicles. "GST on flex-fuel vehicles should be reduced from 18% to 5%, similar to EVs," Ballani said, adding that GST on E100 and E85, currently 18%, should also be cut to 5%.
"These policy measures are essential to stabilise the sugar industry, protect farmer incomes and support India's clean energy transition," Ballani said. (ANI)