KOCHI: Sugar prices in the domestic market are likely to move to new highs with the large-scale use of ethanol as fuel. The Ministry of Petroleum had issued a requirement of a 10 percent ethanol blend in various fuels aiming to reduce the country's oil import bill to a large extent.

Sugar prices are currently at a twelve-year high in the international market, but domestic prices remain unchanged due to strong interventions by the central government. Government figures indicate that the retail price of sugar is currently between Rs 45 and Rs 48 per kg. Central government imposed a ban on the export of sugar yesterday to keep domestic prices down. Traders say that is why prices are still under control.

Public sector oil companies had invited fresh tenders to buy ethanol in bulk after November 1. The companies aim to purchase 112 crore litres of ethanol to be added to various fuels from the market in the next six months.

Sugarcane production falling

A drop in sugarcane production due to climate change and increased use of ethanol for fuel is fueling price hike fears. It is estimated that the production may be reduced by up to 20 percent due to the lack of rain this year in Maharashtra and Karnataka, which are the main areas where sugarcane is grown

Biofuel Policy

India started the necessary measures for the use of ethanol in vehicles in 2003 as part of the measures to reduce air pollution significantly. The policy also aims to significantly reduce the country's fuel import burden. Initially, 5 percent ethanol blending was fixed but currently, the blend is 10 percent. The aim is to achieve 20 percent ethanol blending in fuels like petrol and diesel by 2025. Crude oil imports worth 166.2 billion dollars were made in the last financial year. It is also expected that the trade deficit will be reduced with a significant increase in the use of ethanol.