UP sugar industry wants abolition of molasses quota to distilleries

An industry official said Uttar Pradesh is the only major sugar producing state to follow the policy of molasses quota

In the backdrop of the Uttar Pradesh Cabinet approving Molasses Policy for 2014-15, the state sugar industry has reiterated its long-pending demand for the de-reservation of molasses quota in the state.

The fresh policy mandates each state sugar mill to reserve 15 per cent of their molasses production for use by country liquor distilleries in UP, which figures 62, including captive distilleries of some private mills.

The distilleries get reserved molasses quota at below the prevailing market price.

Molasses are dark and syrupy by-product produced during extraction of sugar from sugarcane. It can be further processed to make ethanol, which is mixed with petroleum products for use as fuel.

A sugar industry official said UP was the only major sugar producing state, which follows the policy of reserving molasses quota. “This distorts fair competition in the market and helps the liquor manufacturers at the cost of sugar mills,” he observed.

The molasses year corresponds to the annual sugarcane crushing season and extends from November 1 to October 31.

During 2013-14 season, UP molasses production had stood at 3.49 million tonnes (MT), down from about 4.17 MT the previous year.

Since, the ratio of molasses produced stands at roughly 5 per cent of sugarcane crushed, this year molasses production could further fall, since cane production had also dipped.

Meanwhile, the fresh molasses policy announced on Tuesday has reduced reserved quota to 15 per cent from 34 per cent. Now, sugar mills have to maintain yearly molasses dispatch ratio of 1:5.66, which means for every unit of molasses reserved, the mills can sell 5.66 units in the free market.

During the first six months of molasses year (November-April), when cane crushing operations are on, the mills have been allowed to maintain dispatch ratio of 1:9. However, the mills are mandated to finally achieve the yearly ratio of 1:5.66 when the remaining six months wind up.

The current price of molasses stands at about Rs 300 per quintal in UP.