Simbhaoli to up ethanol capacity

NEW DELHI: Simbhaoli Sugar Mills Ltd, one of India’s top sugar firms, will raise its ethanol production capacity by 50% to 180,000 litres per day by March 2008, a senior company official said on Friday.

Mills in India, the world’s second-biggest sugar producer, are increasingly focusing on producing ethanol, an alternative fuel made from corn and sugarcane, and power co-generation as sugar prices continue to tumble.

“Sugar is a cyclical business, fraught with risks,” Sanjay Tapriya, the firm’s finance director, said in an interview. “We are pretty keen on raising ethanol production capacity to meet a surge in demand as crude oil prices go up.”

Sugar prices in global and domestic markets have plunged due to an oversupply. London-based International Sugar Organisation (ISO) recently increased its forecast for world sugar surplus for 2007-08 to 10.8 million tonnes, from 10.3 million tonnes in 2006-07, primarily because of higher output in India.

India is likely to produce a record 29 million tonnes in the sugarcane crushing season to September 30, 2007, up from 19.3 million tonnes in the last season.

According to ISO, India is expected to churn out 33.5 million tonnes in 2007-08. Demand for sugar in India, also the world’s second-biggest consumer, is at 19-20 million tonnes annually.

Tapriya said his company has put on hold plans to export white sugar because of low realisations.

“We have an export obligation of 45,000 tonnes left, but we have stopped exporting white sugar as it is not fetching good returns and government has also given some breather to us,” he said.

The government recently extended a deadline for exports of white sugar by a year against imports of raws. It had allowed mills to import raw sugar free of duty between January and September 2005 to tide over a shortage of the sweetener at that time, on the condition that an equivalent quantity of white sugar was exported in 24 months.

Tapriya said Simbhaoli might resume white sugar exports once global sugar prices begin to recover. “I think domestic sugar prices will also start recovering once global prices move northward in next one year. Farmers will not plant cane on a large scale in the next season.”

But with such large surpluses, many international analysts believe any recovery will take time. -Reuters