Despite market glut and record sugar production translating in record molasses production and unsold inventory, molasses is a highly regulated commodity in UP.
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Recently, the Centre had announced hike in the ex-mill price of ethanol derived out of 'C' heavy (final) molasses by almost Rs 3/litre to Rs 43.70/litre for the next contract period starting December 2018. Besides, for the first time, the Centre had decided to encourage production of ethanol, for blending with petrol, directly from sugarcane juice and ‘B’ heavy molasses by fixing a higher price of almost Rs 4/litre above the price of ethanol made from ‘C’ heavy molasses.
Uttar Pradesh, the country's top sugarcane and sugar producer, is unlikely to optimally capitalize on ethanol price hike unless the Yogi Aditya Nath government decontrolled the sale of molasses.
Even while the sugar industry in India is going through one of its worst phases, in Uttar Pradesh, the country’s largest sugar and molasses manufacturer, the state government has raised mandatory storage of molasses to 60% from 50%. Reacting to the move, the Uttar Pradesh Sugar Mills Association (UPSMA) has written to chief minister Yogi Adityanath, drawing his attention to the critical situation faced by the industry.
Interestingly, while 50% storage of this would mean 259 lakh quintal, Uttar Pradesh already has actual storage capacity of 296.5 lakh quintal (as per 2017-18 performance report of UP Excise department), which is anyway more than the current mandated 50% storage limit. According to industry experts, the government’s move is beset with danger. “Excess and prolonged storage of molasses poses many threats to the industry as it is prone to auto-combustion in high temperature during summer season. It is a safety threat which needs to be minimised,” said an industry insider requesting anonymity, adding that the prolonged storage of molasses also results in the deterioration of its quality, which is a national loss of resource.