Industrial giants to reopen 15 closed sugar mills in Bihar; ethanol boom triggers rural revival
The sugar cane industry in India's Bihar state employs a large number of small farmers. Over the past decade, however, the sector has undergone a serious decline with falling world sugar prices, resulting in a social drama. The stagnation of the sugar cane industry saw more than a dozen mills being closed. But now, with record oil prices and the competitiveness of sugar cane derived ethanol, the sector is in for a major revival.
The Bihar State Sugar Corporation, under auspices of the state government, offers 15 closed mills under a long term lease of 60 years, extendable to 30 years. Some of India’s leading oil and industrial companies - Reliance Industries, Tata Chemicals, Fieldfresh of Bharati Enterprises and India Oil - have all expressed their interest in reopening them to produce ethanol.
Other companies that have purchased RFQ forms to make bids are Bharat Petroleum, Hindustan Petroleum, Renuka Sugars, Upper Ganges Sugar, Dhampur Sugar and India Glycols. Officials in the government-owned IOC, the country's largest refiner, also confirmed that it intends to make ethanol and will enter the bidding.
Closed for more than a decade, the mills together have a financial liability of 7 billion rupees (€121.3/US$177.4) under various heads and the funds raised by leasing them will be used to clear the liabilities.
The floor price of these mills, mostly based in northern Bihar, has been fixed at between 80 million (€1.38/US$2 million) and 700 million rupees (€12.1/US$17.7 million). The state is offering a capital subsidy of 10 percent of the investment, subject to a 100 million rupee ceiling.
Earlier this year, India's central government had made 5 per cent blending of ethanol in petrol mandatory and it would increase it to 10 percent by October 2008. This is an ambitious target, but it goes a long way in relieving sugar producers from the oversupply problems they have been facing.
In India, ethanol is made from molasses, a byproduct of sugar cane processing. The efficiency and cost-effectiveness of sugar cane ethanol is largely due to the high sugar yield of the plant and because these sugars can be readily fermented. Ethanol made from starches must first be broken down into simple sugars, whereas the utilization of lignocellulosic biomass requires even more complex thermochemical or biochemical processing steps.
Bihar currently has 252,000 hectares dedicated sugarcane cultivation and produces around 14.4 million tonnes of sugarcane every year. Compared to other states, Bihar is a relatively small player, with a 3% market share (map, click to enlarge). But the land area devoted to sugarcane accounts for only 4.5 per cent of the state’s cultivable area of more than 5.5 million hectares. This means there is vast scope to increase the sugarcane acreage:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: bagasse :: molasses :: sugarcane :: rural development :: Bihar :: India ::
Earlier this year, the Bihar state government amended the Bihar Sugarcane Regulation of Supply and Purchase Act of 1981, allowing sugarcane juice to be directly used to produce ethanol or rectified spirit. The new law also allows the use of bagasse, an abundant sugarcane byproduct, for co-generation of power. Integrated sugar and ethanol plants that utilize bagasse, can produce biofuels with a very strong energy balance.
Out of the 15 closed sugar mills on offer, eight have been reserved for sugarcane based industries like sugar mills, distilleries for ethanol and alcohol production while seven are allowed to be converted into non-sugarcane facilities.
According to state’s Sugarcane development minister, Nitish Mishra, a pre-bid meeting is to be held on December 8 in New Delhi. All bids need to be submitted by the December 20. The leasers will be shortlisted on December 29.
Sugarcane based ethanol has had no impact on world sugar prices so far. This is due to the fact that both Brazil and India made record harvests this year. Next year's harvest is set to break the record again. India has the world's second largest sugar industry, producing some 14 million tonnes of refined sugar per year from cane grown on 3.6 million hectares of land.
Mired by oversupplies, the sugar sector in India this year urged the government to urgently adopt mandatory ethanol targets, in order to push up the price of the commodity. The government responded with the ambitious 10% target for 2008, which will require the production 825,000 tonnes of ethanol (roughly 1 billion liters / 227 million gallons).
References:
Bihar Times: Corporate giants interested in sugar mills of Bihar - December 6, 2007.
Business Standard: Reliance, Tata, Bharti eye Bihar sugar mills - December 6, 2007.
CommodityOnline: Oil giants eyeing Bihar sugar mills for ethanol - December 6, 2007.
The Bihar State Sugar Corporation, under auspices of the state government, offers 15 closed mills under a long term lease of 60 years, extendable to 30 years. Some of India’s leading oil and industrial companies - Reliance Industries, Tata Chemicals, Fieldfresh of Bharati Enterprises and India Oil - have all expressed their interest in reopening them to produce ethanol.
Other companies that have purchased RFQ forms to make bids are Bharat Petroleum, Hindustan Petroleum, Renuka Sugars, Upper Ganges Sugar, Dhampur Sugar and India Glycols. Officials in the government-owned IOC, the country's largest refiner, also confirmed that it intends to make ethanol and will enter the bidding.
Closed for more than a decade, the mills together have a financial liability of 7 billion rupees (€121.3/US$177.4) under various heads and the funds raised by leasing them will be used to clear the liabilities.
The floor price of these mills, mostly based in northern Bihar, has been fixed at between 80 million (€1.38/US$2 million) and 700 million rupees (€12.1/US$17.7 million). The state is offering a capital subsidy of 10 percent of the investment, subject to a 100 million rupee ceiling.
Earlier this year, India's central government had made 5 per cent blending of ethanol in petrol mandatory and it would increase it to 10 percent by October 2008. This is an ambitious target, but it goes a long way in relieving sugar producers from the oversupply problems they have been facing.
In India, ethanol is made from molasses, a byproduct of sugar cane processing. The efficiency and cost-effectiveness of sugar cane ethanol is largely due to the high sugar yield of the plant and because these sugars can be readily fermented. Ethanol made from starches must first be broken down into simple sugars, whereas the utilization of lignocellulosic biomass requires even more complex thermochemical or biochemical processing steps.
Bihar currently has 252,000 hectares dedicated sugarcane cultivation and produces around 14.4 million tonnes of sugarcane every year. Compared to other states, Bihar is a relatively small player, with a 3% market share (map, click to enlarge). But the land area devoted to sugarcane accounts for only 4.5 per cent of the state’s cultivable area of more than 5.5 million hectares. This means there is vast scope to increase the sugarcane acreage:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: bagasse :: molasses :: sugarcane :: rural development :: Bihar :: India ::
Earlier this year, the Bihar state government amended the Bihar Sugarcane Regulation of Supply and Purchase Act of 1981, allowing sugarcane juice to be directly used to produce ethanol or rectified spirit. The new law also allows the use of bagasse, an abundant sugarcane byproduct, for co-generation of power. Integrated sugar and ethanol plants that utilize bagasse, can produce biofuels with a very strong energy balance.
Out of the 15 closed sugar mills on offer, eight have been reserved for sugarcane based industries like sugar mills, distilleries for ethanol and alcohol production while seven are allowed to be converted into non-sugarcane facilities.
According to state’s Sugarcane development minister, Nitish Mishra, a pre-bid meeting is to be held on December 8 in New Delhi. All bids need to be submitted by the December 20. The leasers will be shortlisted on December 29.
Sugarcane based ethanol has had no impact on world sugar prices so far. This is due to the fact that both Brazil and India made record harvests this year. Next year's harvest is set to break the record again. India has the world's second largest sugar industry, producing some 14 million tonnes of refined sugar per year from cane grown on 3.6 million hectares of land.
Mired by oversupplies, the sugar sector in India this year urged the government to urgently adopt mandatory ethanol targets, in order to push up the price of the commodity. The government responded with the ambitious 10% target for 2008, which will require the production 825,000 tonnes of ethanol (roughly 1 billion liters / 227 million gallons).
References:
Bihar Times: Corporate giants interested in sugar mills of Bihar - December 6, 2007.
Business Standard: Reliance, Tata, Bharti eye Bihar sugar mills - December 6, 2007.
CommodityOnline: Oil giants eyeing Bihar sugar mills for ethanol - December 6, 2007.
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