Making HPCL Bio-Fuels (HBL) profitable with current ethanol policy

Abstract

Hindustan Petroleum Corporation Ltd. (hereinafter referred to as ‘HPCL’) through its wholly-owned unlisted subsidiary HPCL Biofuels Ltd. (hereinafter referred to as ‘HBL’ or ‘the Company’) operates two sugar mills in Bihar at Sugauli & Lauriya. The crushing capacity of the plants is 3500 TCPD, the integrated capacity of the distillery plant is 60 KLPD, and integrated capacity of the co-gen plant is 20 MW. We held meetings with HPCL team to understand more about the working of the sugar mill and the industry. Following are some of the notes from our discussions: 1. Each of the sugar mills is allocated an area within a radius of 30 - 40 Km around the mill. Farmers in that area are supposed to supply sugarcane harvest to that particular mill exclusively. Government and Pollution Board regulations for the sugar mill are such that it allows only 180 days of operations which is generally from October-end to March-end. 2. The central government decides Fair Remunerative Prices (FRP). However, states can increase the prices for their respective states. This is known as State Advised Prices (SAP). SAP in Bihar is currently Rs. 3,350 per ton. 3. The mill currently uses 3 stage boiling process for the sugar cane juice to derive maximum sugar and the remaining C-heavy molasses is used for ethanol production. 100% sugar cane give rise to 30-34% of bagasse, 3.5% fresh mud, 5% C-heavy (FH) molasses, and remaining is sugarcane Juice. 1 ton of FH Molasses can cost ~Rs. 2,875 and can produce 262-265L of ethanol. However, if the sugarcane juice is completely converted to ethanol, 1 ton of sugarcane juice can produce 60-65L of ethanol. Price of ethanol per litre from FH molasses in Rs. 43.75 while from B-heavy (BH) molasses is Rs. 54.27. 4. At present, the mills have permission to use 50% of the sugarcane juice for sugar production and the remaining 50% for ethanol production, but they are not using the sugarcane juice for ethanol production for economic reasons. 5. For the production planning purpose, they carry out periodic surveys of the farm and estimate yields by October end. Thereafter, they issue a schedule to farmers detailing the quantity and date to supply their sugarcane harvest. The purpose of our project was to provide recommendations in order to turn the plants profitable.