"I don't think we will be able to sell alcohol by itself below Rs 40, if the price comes there. But some (low grade) alcohol, which is sold in the industry, can be sold in to ethanol. That is why we find ethanol would be an ideal option for us," he said.
As far as sugar is concerned, he expects prices to settle around Rs 33 per kilogram.
Also read: See demand push for ethanol producing machineries: Praj Ind
Below is the edited transcript of his interview to CNBC-TV18
Q: Now this 5 percent ethanol blending with petrol has become mandatory. Does the industry has enough ethanol or is it an issue?
A: Not an issue at all. I think there is no problem over this 5 percent. In fact what is gratifying is that for the next five years they are increasing it by 1 percent yearly.
Q: The mandated price is off and now it is going to arrive at between you and the oil refiners? Do you expect the price to settle well above Rs 27?
A: There was a committee appointed to fix the price for the current year. They have come back with a price of Rs 33. We might settle around Rs 33 or thereabouts, certainly far above Rs 27.
Q: So when will Rs 33 start reflecting into financials, by next quarter onwards?
A: For the quarter ending, March is when you will have full impact because it is not going to be December.
Q: In terms of the 5 percent mandatory ethanol blending that starts from December itself is there any upside that you see in your financials from this quarter onwards or will it come only after Q4?
A: Possibly in Q4. By the time we start supplying, which might be very little in this first month. Maybe to about 8 crore litre, but not going to be a major quantity.
Q: The 5 percent norm was advised even before but people use to do only up to 2 percent. Why do you think this will pick up now? If ethanol was available earlier why did it not happen?
A: I think it was not mandatory earlier. now they have made it mandatory and oil companies are forced to buy. This time, they can have various degrees of blending. It will depend on where they can buy ethanol. They have to show total of some 100 crore litres which didn't happen. Earlier they were saying some zone is not available and that is why they didn't buy it.
Q: If ethanol demand increases would there be an impact on sugar price? Do people like you only extract ethanol from sugar and the residue? Or since you have put in the investments you can even extract it from cane and do you do it?
A: The thumb rule that we have is that whatever the cane price is, sugar price will be one and half times. If you are looking at Rs 24 as a cane price, we should have Rs 36 as sugar price. Normally the alcohol price should be about Rs 8 or Rs 10 more, another 20 percent more on that.
I don't think we will be able to sell alcohol by itself below Rs 40, if the price comes there. But some (low grade) alcohol, which is sold in the industry, can be sold in to ethanol. That is why we find ethanol would be an ideal option for us.
Q: Do you also generate ethanol independently without sugar?
A: Normally not. Most people will not do it because it will be much more expensive to do that directly than what we are doing, ethanol as a by-product.
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