Last week, FCI halted rice supply for ethanol production, leaving distilleries at risk of temporary shutdowns. Discover the impact on alcohol companies.
The Ministry of Food and Consumer Affairs decided to put a stop to exporting non-basmati white rice with immediate effect. Why, you ask? Well, it turns out the delayed monsoon messed up the rice crops, and there was a possibility of a shortfall in production. We discussed this just a few days back. You can read the article here.
Now, the ripple effects of this rice crisis are reaching the alcohol industry in India. So, let’s dive in and see how this situation directly affects India’s alcohol companies.
What’s Happening?
The Indian government had to take serious action to balance the export orders and meet the local demand for rice. They needed to ensure enough rice was available for the citizens, especially with the upcoming wedding and festive season, which is expected to increase demand.
After banning rice exports, the Government of India made another significant move. Last week, they decided to stop supplying subsidised rice for ethanol production through the Food Corporation of India (FCI).
This decision has hit many distilleries hard, causing them a lot of trouble. And some distilleries are even facing the risk of temporarily shutting down due to the sudden halt in rice supply for ethanol production.
According to Business Line, around 10-12 distilleries in Uttar Pradesh and 15-16 units in Maharashtra had to halt their operations because they could not get the rice they needed.
How Will This Rice Shortage Affect Alcohol Industry?
BSE-listed Gulshan Polyols recently reported to the stock exchange that production at its 500-kiloliter-per-day grain-based ethanol manufacturing plant in Madhya Pradesh’s Chhindwara district would be temporarily suspended for a few days, as per Business Standard’s report.
Meanwhile, another major player in the grain-based ethanol sector, Globus Spirits, also announced on the exchanges. They mentioned that they are making a strategic move by shifting their feedstock from surplus rice to other raw materials like broken rice and maize. These alternatives can produce extra neutral alcohol (ENA) and ethanol. However, during this transitional phase, Globus Spirits anticipate a temporary shutdown of around 7-10 days at their West Bengal and Jharkhand facilities.
A Look at the Indian Alcoholic Beverage Industry
According to Statista, the revenue of India’s alcoholic beverages market is set to hit a whopping 49,580 million USD in the year 2023. And that’s not all. The market is expected to grow at an annual rate of 6.53% (CAGR 2023-2027).
But, what’s driving this impressive growth? Well, several factors are contributing to it. Firstly, urbanisation is on the rise, and with that comes an increase in consumer preferences for alcoholic beverages. Moreover, the purchasing power of consumers is also on the upswing, leading to a higher demand for these products.
Despite its substantial market size, the Indian alcoholic beverage industry is presently influenced by foreign companies. To truly make its mark on the global stage, India must build its brand and reputation for offering top-notch quality and innovation in alcoholic beverage production.
What’s Next?
The Food Corporation of India (FCI) has stopped supplying rice for ethanol production. However, the Government of India is optimistic that this won’t affect the ethanol blended petrol program in a significant way, as per Business Line.
On another note, according to a report by Moneycontrol, the industry expects the global rice shortage problem to improve by 2024. As the problem of rice shortage reduces, the difficulties of the alcohol industry will also reduce.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.
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