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INDIA is importing large quantities of alcohol from Brazil as acute shortage of local sugarcane pushes down supply of byproduct molasses and raises the cost of making chemicals, besides disrupting ethanol supply to oil marketing companies (OMCs) for green fuel blends.

The chemical industry expects to ship in at least 5 lakh tonnes alcohol by December end to tide over the crisis. Brazil is the world’s top producer and exporter of ethanol and prices have crashed there due to oversupply. The cyclical drop in sugar production means sugar mills are unable to fulfil their contracts to supply ethanol to petroleum companies, making it tough to meet even the E5 target.

Bajaj Hindusthan, India’s biggest sugar company in terms of sugar production, is currently supplying only half of its contracted ethanol quantity to the OMCs because molasses are not available. Another large player, Shree Renuka Sugars, is importing ethanol from Brazil to meet its commitment to the OMCs.

Since there is only a minor penalty for non-delivery, several mills are learnt to be reneging on their ethanol contracts and instead selling it in the spot market. Their biggest customers are liquor companies, which are willing to pay a substantial premium for it. In UP, 30% of the molasses supply has been reserved for country liquor, said a senior official from a UP sugar company here. Even so, there is a natural limit to how much alcohol liquor companies can buy, he added. That has left industrial alcohol companies with no option but to import, since Brazilian alcohol lands here 20% cheaper.

Large chemical companies such as Jubilant Organosys, for instance, are preparing to contract up to 1 lakh tonne ethanol from Brazil to meet their requirement for ethanol. Others such as India Glycols are also likely to bring in similar quantities. “Distilleries are selling alcohol for Rs 25 per litre. Duty-paid alcohol from Brazil lands at Rs 22 per litre even with the rupee at Rs 52 per dollar. Besides, Brazilian sellers are giving 90-days credit. Indian sellers want spot payment,’’ said a chemicals industry official, who did not wish to be named.

Indian alcohol imports would have been even higher if chemical companies were running their factories at full capacity. In fact, according to some estimates, their demand for alcohol is down by half this year chiefly because they are importing several finished chemicals instead of producing them more expensively here. “We have to compete globally. That is why we are importing acetic acid from Malaysia now instead of manufacturing it here. Acetic acid plants are lying closed here. Had these plants been working, Indian alcohol imports would be double,” he added.

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