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Rs 3600 capex for India made foreign liquor production

Faced with the diversion of India made foreign liquor after 5% mandatory blending of ethanol with petrol, independent producers and sugar mills have proposed capital expenditure of Rs 3600 crore to bridge the deficit of around 1000 million litres of India made foreign liquor (IMFL).

IMFL is a by-product of sugar production which is used as raw material for potable alcohol and ethanol production. IMFL can also be produced through grains like rice and corn which most of foreign liquor brands use to sell at a premium over molasses based. IMFL further processed to produce ethanol and potable alcohol.

Despite 5% mandatory blending of ethanol with petrol announced by the government in January 2013, sugar mills have been able to supply only 600 million litres of the total requirement by the oil marketing companies (OMCs) of 1380 million litres, rendering thereby a deficit of 780 million litres. Also, chemical industry also faces deficit due to diversion of IMFL for ethanol production.

“India faces IMFL deficit of around 1000 million litres with room for more. In case the government makes 10% ethanol blending with petrol mandatory, another 1380 million litres deficit would arise. These producers are anticipating the deficit two years down the line as plant construction time and have started preparations now,” said Deepak Desai, Chief Consultant, ethanolindia.net, a leading consulting firm in ethanol.

Kolkata based Pincon Spirit Ltd (PSL) has infused Rs 30 crore to support the overall expanded business volume in the financial year 2013-14. The company enhanced bottling capacity at 50,000 – 2 lakhs cases per month this year from 50,000 cases per month in the previous year in addition to doubling bottling capacity at its subsidiary to 60,000 cases per month in 2014-15 versus 30,000 cases last year. PSL is planning to place their IMFL brands in different others state in within short span, so as to attain the pan India presence and to support this expansion in business they are contemplating various alternative funding route.

“We are looking to grab the opportunity through acquisition of small units and expand their capacity through fresh capital infusion. We have initiated negotiations with Mysore Sales International – a Karnataka government undertaking, for supply of IMFL products in addition to our strengthening position in West Bengal,” said Arup Thakur, Director Finance, PSL.

Meanwhile, the apex sugar industry body Indian Sugar Mills Association (ISMA) has urged the government to allow direct manufacturing of sugarcane for ethanol production to reduce the raw material supply for sugar manufacturing.

“Looking at the circumstances ahead, we see bright future for both grain and molasses based IMFL producers ahead,” said Desai.

Both grain based and independent molasses based IMFL production is set to begin in 30 months.

Proposed distillery plants
Company Plant size Location
Nadhi Bioproducs Grain based, 60 KLPD and 2 MW cogen Mahbubnagar, Andhra Pradesh
Global Spirits Grain based, 60 KLPD Baharogora, Jharkhand
Lorvin Industries Belgaum, Karnataka
Shree Basaveshwar Sugars Bijapur, Karnataka
KPR Sugar Mills Molasses based 90 KLPD Bijapur, Karnataka
Shree Shivsagar & Agro Products Molasses based 45 KLPD Belgaum, Karnataka
Gulshan Polyols Grain based Chindwara, MP
Gandhinglas Agro Alcochem Kolhapur, Maharashtra
Babasaheb Ambedkar Sahakari Sakhar Kharkhana Osmanabad, Maharashtra
Source : Ministry of Environment

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