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Sugar companies in sweet spot: Government fixes ethanol price at Rs. 27 a liter

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Sugar companies in sweet spot: Government fixes ethanol price at Rs. 27 a liter
Description  :  Industry
Date  :  Aug-17-2010

Sugar companies welcomed the move to get Rs. 27 a liter for ethanol as the surging demand for fuel has landed sugar companies in a sweet spot. Oil companies will now have to buy ethanol from sugar companies to be used for blending with automobile fuel.

Since sugarcane production is expected to be higher this year after improved acreage for the crop hence the move has come at a good time for sugar companies. However the higher sugarcane availability is expected to depress prices even as sugar prices are off their peak seen last year.

the industry is expected to produce 160 crore liters during the current sugar year as selling ethanol to oil companies also opens another revenue stream for sugar companies.

While it is a party time for sugar companies, the oil companies are clearly unhappy as this mandate would mean an additional outgo of around 500 - 600 crore rupees from their kitty.

The chemical industry has also opposed the move of the government for having fixed the price at Rs. 27 per liter and have asked the government to leave the pricing to market forces.

The government had in the past made ethanol blending mandatory but it could not be implemented due to non availability of ethanol.

Shree Renuka Sugars will have a plant that will provide 3000 tons per day and will be operational in January next year. Further there are several companies who are gearing up for the opportunity.

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