UP sugar mills may gain from ban on molasses export

The new Molasses Policy of the Uttar Pradesh government in banning the export of molasses is likely to benefit the state’s integrated sugar producers, who have connections with subsidiary distilleries.

Such sugar producers may be able to utilise molasses at relatively lower input cost. However, the standalone mills may have to settle with lower prices for molasses than the prevailing open market rate of about Rs 350 per quintal. They claim this will adversely affect their competitiveness.

The state government banned molasses export in view of the shortfall in sugarcane production and the subsequent low production of molasses this season.

It took the step to ensure adequate availability of molasses for the local industry and country-made liquor manufacturers.

Accordingly, the government has also increased the reserve of molasses for country-made liquor from 25 to 30 per cent.

“Since, the production of molasses this year is likely to dip to under 290 lakh quintals from about 370 lakh quintals last season, the state government banned its export,” UP Excise Commissioner Sudhir Bogade told Business Standard.

“The UP distillers have the capacity to fully utililise the molasses and we feel it is a pro-industry decision,” a major sugar producer said.

Another industry player said that standalone sugar producers, however, may take a hit of almost 10 per cent on their profitability due to the ban.

All the sugar mills of the state would reserve 30 per cent of the molasses produced by them for locally-made liquor. Molasses of sugar mills, who have distillery as subsidiary, would be exempted for the distillery for its utilisation, but 30 per cent reservation would be applicable on the molasses remained after their utilisation.