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India Implements 50% Duty on Molasses Exports: Exploring the Impact on Global Trade and Agriculture

New Delhi: The government has imposed a 50% export duty on molasses, a by-product of sugarcane, with effect from Thursday, according to a government order.

This decision, announced late Monday, is in response to a sugarcane shortage caused by erratic monsoon rains. The export duty is a strategic measure to regulate the supply and demand of commodities, ensuring domestic availability.

Various sugar industry associations, such as the National Federation of Cooperative Sugar Factories Ltd, the West Indian Sugar Mills Association, and the South Indian Sugar Mills Association, have sought export restrictions on molasses. This follows a proposal by the food department.

Quoting government officials, Mint on 29 December reported that the union government was considering a 50% duty on the export of molasses to augment supplies for meeting India’s target for cleaner and more efficient ethanol-blended petrol.

The government aims to achieve its E20 (20% ethanol blended petrol) target by 2025-26 from its present 12%.

India is the world’s largest molasses exporter and contributes about 25% to global trade. Key buyers include the Netherlands, Philippines, Vietnam, South Korea, and Italy, with major exporting states being Maharashtra, Gujarat, and Karnataka.

“Imposition of 50% export duty may succeed only in partially stopping molasses exports to boost domestic ethanol production as the importers use the commodity as cattle feed ingredient, which is a relatively inelastic use,” said G.K. Sood, an industry veteran.

Efforts to boost domestic availability of molasses for ethanol production follow recent curbs on sugar exports and directions to mills to cease using cane juice for the biofuel, which was reversed later. An expected shortage in sugar supplies for domestic consumption has already spiked the prices of the sweetener to a 14-year high.

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In September, a proposal was made to impose a 30% export duty to discourage the export of molasses, but no decision was taken by the top authorities then.

The 50% duty proposal by the food department is in response to limited sugar-based feedstock availability for ethanol production and international market price trends. 

C-heavy molasses production is estimated to be approximately 4.5% of the total cane crushed, yielding around 225 crore litres of ethanol. It is the last by-product in the sugar refining process, and has no sugar content left in it, unlike B-type and sugarcane juice.

Currently, a big chunk of C-heavy molasses is being exported for various uses, potentially generating 30 crore litres of ethanol, NFCSF said earlier.

To achieve the 20% blending target, it is crucial to utilise all C-heavy molasses for ethanol production, the industry body added. 

As of 30 November, India’s ethanol production capacity was about 13.8 billion litres. Of this, about 8.75 billion litres were molasses-based and about 5.05 billion litres grain-based.

To achieve the target of 20% blending, about 10.16 billion litres of ethanol is required. Another 3.5 billion litres of alcohol or ethanol would be required for other sectors.

For this, about 17 billion liters of ethanol production capacity is required to be in place by 2025-26. About 7 billion litres —nearly half of the total ethanol requirement—would have to come from the sugar sector, and the remaining from food grain-based feedstock.

This measure follows a weak monsoon, which has led to lower sugar production and could impact the diversion of sugar for ethanol. 

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The current crop year’s sugar production is estimated to be 29-30.5 million tonnes, compared to domestic consumption of 27.5-28 million tonnes. In the 2022-23 season, India is estimated to have produced 32.7-32.8 mt of sugar after the diversion to ethanol.

“Right decision in right direction, albeit, little late. Biofuel policy has national importance hence every drop of molasses will now be used for producing fuel ethanol so as to achieve 20% EBP by the end of next year,” said NFCSF managing director Prakash Naiknavare

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