ISMA urges govt to ban ethanol imports, flags risk
By Sandip Das
The Indian Sugar and Bio-energy Manufacturers Association (ISMA) has opposed the proposed discussion on allowing ethanol imports under the India-US trade framework, citing that such a move would disrupt the payment of fair and remunerative prices (FRP) to sugarcane farmers and lead to underutilisation of domestic ethanol production capacity.
In a communication to commerce minister Piyush Goyal the industry has voiced concerns regarding the potential removal of restrictions on ethanol imports for fuel blending.
“It risks disrupting farmer payment cycles, especially since ethanol prices are closely tied to the FRP of sugarcane,” ISMA stated in its communication.
The communication comes amid ongoing trade negotiations between India and the United States under which, sources said, the US is pushing for access to the Indian market for ethanol used as fuel. The US largely produces ethanol from grains.
It stated that if imports of ethanol for fuel are allowed, then it would dilute the significant gains made in domestic capacity building, investment, and job creation.
It has been said that allowing such imports would undermine the significant gains made in building domestic capacity, generating employment, and attracting over Rs 40,000 crore in investments since 2018, during which ethanol production capacity grew by more than 140%.
Ethanol blending in petrol has currently reached 19% and the government is aiming to meet the 20% target by the 2024-25 supply year, ending in October — one year ahead of schedule. The association said this progress has been made possible by favourable government policies and restrictions on fuel ethanol imports.
The Association highlighted that under the National Policy on Biofuels (2018) and followed by the DGFT notification of August 21, 2018, which categorised ethanol imports for fuel as ‘restricted,’ has been instrumental in building a self-reliant domestic ethanol economy.
Earlier ISMA had projected a significant recovery in India’s sugar output in the next season, from a projected 5-year low at 29.5 million tonne (MT) in the current 2024-25 season (October-September).
The diversion for ethanol is expected to rise to 4 MT in 2025-26 season, from 3.5 MT in the current season supported by high sugar output and the government aiming to achieve 20% ethanol blending in petrol as it offers faster cash-flow churn, according to the consulting firm.
The country’s gross sugar production is likely to rise by 15% in the 2025-26 season (October-September) to about 35 MT, due to prospects of ‘above average’ monsoon, boosting cane acreage and yields in key sugar producing states such as Maharashtra and Karnataka, according to Crisil ratings.
The growth in sugar output is expected to ease tightness in domestic supply and has the potential to boost ethanol diversion and revive exports, according to the consulting firm.
This article has been republished from The Financial Express.