India's Ethanol Blending Push: A Boost for Sugarcane Utilisation and Millers' Finances

India's target to blend 20% ethanol in petrol by ESY 2025 will require increased sugarcane and grain use, improving sugar inventory and millers' cash flow. Ethanol production from grains and sugarcane is projected to rise, reducing crude oil dependence while balancing sugar inventory amidst policy considerations.

The Indian government's goal to blend 20% ethanol in petrol by Ethanol Supply Year (ESY) 2025 requires an uptick in sugarcane utilization, according to a Crisil Ratings report released on Monday. This objective is poised to optimize sugar inventory levels and enhance millers' cash flows.

The report specifies that ESY spans from November to October, and meeting the 20% ethanol blending target—amounting to 990 crore litres annually—necessitates the efficient use of both grain and sugarcane feedstock. The annual ethanol output from grains alone is projected to significantly surge to 600 crore litres by the next season, a pronounced increase from this season's 380 crore litre estimate.

Moreover, sugarcane-derived ethanol production will need to bridge the balance, a viable option given the existing substantial capacity. This shift will further optimize sugar inventories, particularly due to the high carry-over stock anticipated at the season's end, amid government restrictions on ethanol production diversions and exports.

(With inputs from agencies.)