Mainstreaming biofuels

Reliance's proposed forays into ethanol and subsequently sugar production are welcome. It would help mainstream bio-fuels in India, offer sugarcane growers better remuneration and provide a considerable boost to the country’s quest for alternative energy sources. The company is reportedly planning to manufacture ethanol initially in the three processing units in Pune, Osmanabad and Kolhapur and commence sugar production from the 2007-08 crushing season. Ethanol production is still quite low in India and needs to be expanded. This will not only help in reducing burdensome oil imports but also promote a cleaner environment. The entry of Reliance, with all its financial muscle and commercial expertise would help in augmenting ethanol output substantially. This, along with its plans to venture into sugar production in the near future would provide an additional incentive to sugarcane farmers to further increase planting and derive a higher average return per acre. Moreover, greater profitability will incentivise sugarcane production for the traditional rice and wheat growers. This would, in turn, help in enhancing sugar yield from the already robust 19 million tonnes in 2005-06. With the opening up of foreign markets in Pakistan, Indonesia and Sri Lanka and withdrawal of subsidised European sugar from global markets following a WTO ruling, higher production will allow sugar mills to export more and take advantage of high international prices.
Reliance, of course, isn’t the only company eyeing the sugar sector. Excited by the promise of huge returns, many other companies are also planning entry. This is, indeed, welcome. Increased competition for mill-land among the new entrants and higher provisioning of cane to them will ensure consolidation of the sector in the near future. Government policies must fall in line with the favourable changes underway in the sector.


-- The Economic Times Editorial