The department of food has asked all sugar mills to expedite supply of ethanol to the oil marketing companies.
To this effect, a meeting has been called towards end of this month by the department to gather information on number of sugar mills supplying ethanol and supply position of ethanol blending programme.
This is one of the agenda items besides review of sugar and sugarcane production estimates in the current season, actual month wise sugar production up to December 2014, cane arrears position as on January 15 2015 etc.
In the wake of expected excess supply in this new sugar season 2014-2015, the department has asked the sugar mills to shift to new revenue models like ethanol.
As per estimates provided by cane commission rates across sugarcane manufacturing states, the supply of sugar is expected to be around 25 mn tonne as against 24.5 mn tonne last season.
The increased production is estimated due to higher acreage in Maharashtra and Karnataka and carries over stock of 3-4 lakh tones.
Oil marketing companies (OMCs) have recently once again floated a tender to procure 97 crore litres of ethanol at Rs 42 a litre ex-mill.
Reportedly, the tender involves a 7.5% bank guarantee of the total value of ethanol as one of the conditions for bidding. This was a second round after cancelling the tenders last year in December when the crude prices started its downslide.
Meanwhile, the payment arrears have come down to around Rs 1,000-2,000 crore. The Supreme Court upheld the directive of the Allahabad High Court to sugar mills in Uttar Pradesh that they should sell the sugar stocks hypothecated to the banks in order to clear the arrears of the sugarcane farmers.
The banks had filed a petition challenging the directive in the Supreme Court, which has been struck down. According to reports, the banks have an exposure of Rs 3,000 crore to the mills, and they fear these loans might now turn into non-performing assets, because they will fall short on collateral.
On August 13, the HC had directed mills to liquidate 15 percent of their respective sugar stock within three weeks at the floor price of Rs 3,100/quintal to pay arrears.
In its affidavit, UP Sugar Mills Association (UPSMA) had informed court yesterday 65 of 95 mills had sold nearly 2,35,862 tonnes of sugar till August 31 and collectively deposited over Rs 700 crore with the respective district magistrates.
State Bank of India (SBI), Punjab National Bank (PNB) and UP Cooperative Bank had also staked preferential right on the liquidation proceeds of sugar stock, contending the mills had taken working capital loans based on the stock.