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Cane SMP Fixed At Rs 81.18 Per Quintal. F&B New, Dec. 2006

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The Centre has fixed the statutory Minimum Price (SMP) of sugarcane for the 2007-08 season at Rs. 81.18 per quintal linked to a basic recovery of 9%. The decision was taken at the meeting of the Cabinet Committee of Economic Affairs (CCEA). For every 0.1% increase in recovery beyond 9%, factories will have to shell out an extra 0.90 per quintal. This is against the current season's base SMP of Rs 80.25 per quintal, with the incremental premium component working out to Rs. 0.90 per quintal.

The Centre's SMP has lost much of its relevance in recent times due to the state's independently fixing their own cane prices called state advisory price (SAP). In the current season, UP has declared a price range of Rs 125-130 per quintal, while Tamil Nadu SAP has been pegged at Rs 102.50 for 9% recovery, apart from a premium factor of Rs 0.90 per quintal. Given an average recovery of 9.8% in these two states, the SMP comes to around Rs 87.45 per quintal, compared to the SAP of Rs 109.7 per quintal in Tamil Nadu and Rs 125-130 in Uttar Pradesh.

Even in Maharashtra, where average recovery is higher at 115%, the SMP for 2006-07 works out to Rs 102.75 per Quintal, whereas factories have already paid a first installment of Rs 90 per quintal. If one adds harvesting and transport costs of Rs 20 per quintal, it implies an actual price of Rs 110 per quintal. The final price would be much higher, with the Chhatrapati Sahu Cooperative Mill forking out as much as Rs 170 per quintal in 2005-06, net of harvesting and transport charges.

The SMP has no meaning this season, but may be crucial for 2007-08 when sugar prices would have fallen more and states would be forced to declare more realistic cane prices. The decision to announce a conservative SMP well ahead of the next season would send the right signal to the states and farmers alike, industry sources pointed out.

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Latest Move On Service Tax On Distillers Raises Concern. BS. 1-1-07

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A recent draft circular, put out for public responses/comments, of the department of revenue in relation to levy of service tax on distillers, under the heading of business auxiliary services, has caused widespread concern.

It is common practice in the liquor industry for the brand name owners, especially foreign ones, to enter into strategic tie-up with third party manufacturers or contract bottling units (distillers or bottlers), for manufacture of branded liquor. The reason that it is so is that there are stringent licensing requirements for manufacture and/or sale of liquor in India and only distillers/ bottlers who are in possession of such licences are able to manufacture and/or sell branded liquor, regardless of who the brand name owners are. Thus the distillers/bottlers enter into contract manufacturing activities, whereby they manufacture and sell branded liquor, the brand belonging to the brand name owner, and share proceeds with the said brand name owners. Alternately, they manufacture branded liquor on job work basis, whereby the brand name owners, at all times, retain title in the manufactured goods. These arrangements are seen as a win-win for both parties, as the brand name owners are able to realise the benefits of sale of their branded goods in India and the distillers/bottlers are able to utilise fully their manufacturing capacities.

The circular referred to above has taken the view that the activities of blending, manufacturing, bottling and labelling of liquor would amount to provision of business auxiliary services, if carried out on job work basis by the bottler on behalf of the brand name owner. It needs to be stated straightaway that the circular is limited to a situation of job work, whereby the distillers or bottlers do not hold proprietary rights over the branded goods. Consequently, the circular, in terms, does no extend to a situation where such distillers or bottlers carry out such activities, not as job work but as contract manufacturers, involving the sale or the transfer of property in such branded goods. In such a situation, no service tax will be applicable, as per the above circular. However, the more pressing concern is with regard to whether at all such activities are chargeable to service tax, even if carried out on a job work basis.

The point here is that definition of business auxiliary services under service tax law covers the activities of production or processing of goods for or on behalf of clients, provided that such activities do not amount to manufacture, within the meaning of Section 2(f) of the Central Excise Act, 1944. The circular suggests that since the manufacture of alcoholic beverages falls outside the Union List of the Seventh Schedule of the constitution of India, the Central Excise Act, being an act of the union, cannot apply to such manufacture at all and purely for the reason, the activities of blending, manufacturing bottling or labelling of liquor, by job workers, would be chargeable to the service tax. This argument that there is no requirement to determine whether such activities amount to manufacture under excise law, qua alcoholic products, appears to be a flawed one. The definition of business auxiliary services extends only to production of processing activity which do not amount to manufacture within the meaning of Section 2(f) of the Central Excise Act.

The expression within the meaning would suggest that the appropriate test is whether the activities performed by the Job workers constitute manufacture, if the tests which are used under Section 2(f) to define manufacture are met. It cannot be that since alcoholic products are not covered under the Central excise law, the tests under Section 2(f) are not required to be met. As along as the activities carried out by the distillers/bottlers constitute manufacture under Section 2(f), as per the tests determined there under, no service tax should apply. Now, the accepted test under Section 2(f), as per several Supreme Court decisions on the point, is that there should be a transformation through the process of manufacture, of a product from one to a commercially distinct another with its own characteristics, identity and use. If the process does result in such a transfor mation, through the process of manufacture, of a product from one to a commercially distinct another, with its own characteristics, identity and use. If the process does result in such a transformation, the Section 2(f) test is met and manufacture is said to have taken place.

The activities typically performed by the distillers/bottlers do result in such a tranformation. Therefore, such activities cannot be chargeable to service tax, because of the exclusion provided under business auxiliary services to manufacturing activities. Equally, the principle that service tax ought not to apply, given that an excise tax does apply, albeit at the state level for alcoholic products, instead of at the Central level, as is the cases for products other than alcohol, is a relevant one. The idea apparently behind the exclusion for manufacturing activities from the purview of service tax was the avoidance of a duble taxation of the same activity, to both the excise tax and the service tax. The departmental circular will undoubtedly result in this double taxation.

This is not desirable. Also, in terms of the recent decision of the Supreme Court in a BSNL case, it is relevant to argue that such double taxation of an activity, to both goods taxation and to service taxation, is impermissible. It is true that the decision was with regard to sales taxation and service taxation but the fundamental principle is equally relevant to the matter under discussion.

There is ther fore an urgent need to represent to the government on the matter so that the circular is not formally issued in its present form.

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Drilling into Distillation, Dehydration

Companies aim to tweak and transform key systems to reduce energy use and resolve bottlenecks. This story appears in the August issue of EPM.
By Susanne Retka Schill | July 21, 2015


Drystill Holdings partnered with Fielding Chemical Technologies to build a pilot-scale system to validate its novel pass-through distillation system.
PHOTO: DRYSTILL
Optimization efforts most often look at boosting yield, but as finely tuned and balanced as ethanol plants are, any increase in ethanol has to be matched by increases in the multiple systems that follow. Distillation and dehydration are two that often create bottlenecks. Two companies introduced systems aimed at relieving that bottleneck at the International Fuel Ethanol Workshop & Expo in June, although many others have taken up the challenge.

Whitefox Technologies Ltd. has developed a membrane technology that has been used in Europe for more than a decade, explains Stephan Blum, chief technology officer. Primarily used for potable alcohol and integrated into chemical processes for things like perfumes, the company is now introducing it to the fuel ethanol industry. “We had to adapt our technology so that it can survive in the larger scale and rougher environment that we see in the biofuels industry,” he says. “When the plants get larger, the technology has to become more robust.” Whitefox has developed a bolt-on application that can treat part or all of the regen/recycle stream in the molecular sieves. “If you take regenerate or recycle streams out, and eliminate the feedback loop into distillation, the whole system should run quite a bit more stably,” he adds. With about 21 percent of the mole sieves’ capacity taken up by the regen/recycle stream, moving that forward through the Whitefox membrane technology could increase capacity through the sieves. During the summer, he adds, it could also address the need to slow the sieves down because of the limitations in cooling capacity due to high heat and humidity.

Whitefox began commissioning its first system in June at one of Pacific Ethanol’s facilities. Blum described it as an industrial-scale demonstration plant. “There we will treat a portion of the regen stream in order to give them a capacity increase of roughly 7 percent or reduce energy consumption by avoiding their cooling water limitation.” The goal is to help the company continue to reduce its energy use, and thus its greenhouse gas emissions. The skid is designed to verify the technology and, based on those results, decide the best size and integration strategy to meet the plant’s needs.

A membrane system could ultimately replace the current distillation and dehydration systems in a plant, Blum says, but Whitefox’s approach has been to design a bolt-on that doesn’t require major changes to a plant. “We can treat the side streams and it doesn’t interfere with the main product stream. It’s easier to integrate.” As the technology becomes better understood and known, he envisions multiple ways it can be integrated. “The thing is, distillation in itself is not energy inefficient. Even though you add steam and evaporate, you reuse that heat somewhere else in the process so your net energy consumption is quite low. The distillation process is also a cleaning process, which helps to keep the entire process reliable. A combination with distillation is often an intelligent procedure.”

Hydroheater Application
Hydro-Thermal Corp., well known in the ethanol industry for its jet cookers, has turned its experience into finding a solution to the molecular sieve bottleneck. Gary Bymers, international sales manager, described the company’s 200 proof vapor depressurization system in a presentation at the FEW in Minneapolis. “The idea is to debottleneck and, in the process, there are energy savings. The total amount of cooling water is reduced and the total amount of heat that’s used in the system is also reduced.” 

Rather than recycling vapors through the mole sieves, piping is modified, he explains. “The piping changes the direction so the 200 proof vapors come down and are mixed with the flow in a recirculation area through our low-pressure hydroheater. You increase the total amount of product recaptured instead of recycling back through the sieves.” The change adds approximately 2 gallons per minute (gpm) to product flow and, by adding plates to the 190 proof heat exchange, the heat recovery from the 200 proof product is used to increase the temperature of the 190 proof sieve feed from between 130 to 140 degrees Fahrenheit to about 185 degrees. The main savings come from reducing the load on the cooling water heat exchanger and condenser and increasing the temperature to the vaporizer, but the most significant benefit comes from the boosted flow rate of 200 proof product.

The company has one installed at Dakota Ethanol LLC, a 50 MMgy ethanol plant in Wentworth, South Dakota, Bymers told the audience at FEW. In addition to installing Hydro-Thermal’s depressurization vapor hydroheater skid and adding plates to the 190 heat exchanger, the system involves upsizing the existing 200 proof pump from 15 to 25 horsepower with a variable frequency drive.

The bottom line benefits can be significant, Bymers adds. In a 100 MMgy plant, the steam usage can be reduced by 2.9 million Btu, which at a natural gas cost of $4 per MMBtu works out to an annual savings of approximately $126,000. The big benefit, though, is from the 2 gpm increase in product flow, which works out to about 5 percent increase in throughput. In addition, fusel oil upsets are minimized. “That’s a positive operational impact that’s hard to quantify,” he says.

Other companies are working on improved distillation and dehydration technologies as well. India-based Praj Industries Ltd. spoke at FEW in Minneapolis about its patented EcoSmart technology, which could be used by corn ethanol plants interested in diversifying and adding beverage or industrial alcohol capability while lowering energy and water use. Two years ago at the FEW, California-based Membrane Technology and Research Inc., a well-established California-based company in separation technologies for refineries, hydrogen separation and gas clean-up, described its research and trials on a low-energy membrane distillation. And Zeochem AG, which says 70 percent of the plants in North America use its molecular sieve technology, is reportedly working on improvements that will be introduced in the next couple of years. In Japan, Hitachi Zosen Corp. has developed a dehydration technology using a zeolite separation membrane.

Novel Distillation
In addition to those looking at ways to improve existing systems and reduce the load on molecular sieves, there are a two companies developing radically different technologies.

In Kansas, brothers Dick and Sam Burton have formed the startup company Distillation Technologies Inc. to commercialize their technology. The proof of concept for the trademarked Bubble Spray Distillation has been achieved at bench scale, with the help of Kansas City-based Midwest Research Institute and Aerosol Research and Engineering, says Dick Burton. They’ve received a patent on the ethanol distillation concept and have a second patent pending on using the method for water purification.

“We take the beer and infuse air into it and saturate it and spray it through some special nozzles into a vacuum chamber, the distillation column. We replace the stripper section with our equipment,” Burton explains. “When the fluid is sprayed into the column,   aerosol-sized droplets come out. Each of the droplets has a bubble inside. The bubble grows exponentially inside the vacuum chamber and explodes. It creates tens of thousands of very small droplets. Those nano droplets now have surface tension relieved on them and they readily vaporize at half the energy.” Burton adds that the low-vacuum environment also relieves the azeotropic bond. “You can make pure ethanol at one pass, without molecular sieves,” he says. The distillation system operates at 104 degrees Fahrenheit, producing 99.5 percent alcohol in one pass with an energy savings calculated at 75.6 percent less than standard distillation. The technology can also be applied to water purification, Burton adds, and could potentially replace the evaporators in a whole stillage treatment system.

The Burtons finalized an agreement with Easy Energy Systems Inc. in mid-June to build and conduct pilot scale testing on both ethanol distillation and water purification systems. Minnesota-based Easy Energy Systems has developed a modular ethanol production system targeted at waste streams. One of the limitations of many alternative waste-based feedstocks is that the alcohol concentrations are lower than in a conventional corn-ethanol plant, explains Jonathan Scarfpin, vice president of business development for Easy Energy Systems. “That makes distillation energy costs quite high.” Of equal interest, he adds, is the application of the technology to water purification.

In Ontario, Drystill Holdings Inc. has completed testing on a pilot plant in collaboration with Fielding Chemical Technologies at Mississauga. Drystill has developed pass-through distillation technology utilizing a patented stripping absorption module that achieves separation at room temperatures. Pass-through distillation adds two steps in the middle of the basic evaporating and condensing functions of distillation. The module first absorbs the evaporated gases in a liquid medium of concentrated salts and then boils the absorbed material out in a desorption step before condensation. With the middle absorption step running at higher temperatures, the heat recovered there can be used in the evaporation step. Drystill estimates a 50 percent energy reduction when compared to a traditional system.

Drystill’s chief technology officer, Ian McGregor, says the system could be incorporated into the existing cooling circuit of a fermentation tank to continuously remove wet ethanol from the live fermentation broth. “Because low-temperature distillation permits ethanol to be removed during fermentation,” he says, “it opens up new opportunities for improved fermentation and hydrolysis.” The removal of the ethanol during fermentation could shorten fermentation time and permit yeast and enzyme recycling. McGregor also envisions it being used in continuous fermentation. “The fermentation tanks would be smaller in size than batch tanks and be equipped with some means of mixing to ensure that the broth is nearly homogeneous.” As the broth moves from one tank to the next, a room-temperature still removes a portion of the ethanol in the broth moving between tanks. “Product inhibition would be eliminated, the total residence time reduced to less than 20 hours, and the biocatalyst culture would remain healthy and numerically superior to unwanted species.”
First, though, Drystill’s pass-through distillation process needs to be validated at larger scale. Company CEO Christopher Belcher reports discussions are under way with potential partners to move the process from pilot to demonstration scale. 

Innovation Challenge
Working on novel technologies is not for the faint of heart. Presentations to potential ethanol industry partners were quite frustrating, Burton says, “They laughed at us.” Even the patent office asked for more extensive documentation to explain the science behind the novel technology, he says, adding he and his brother have worked on this for seven years.

McGregor speaks of a similar experience. “We’ve been struggling for six years to make people aware that we’ve got something here,” he says. Early on, an industry insider cautioned them that their initial idea to apply membrane technology to replace molecular sieves would be a hard sell. “He said nobody really has much of an issue with incumbent technology.” But he and several others told McGregor and his partner, if they could use membranes to separate ethanol from the live fermentation broth, it would be a real boon to second-generation ethanol. “Yet, we’ve accomplished this, and we can’t seem to get the right people interested.  Or, the people that have an interest are timid. Or they are already committed to another technology. Or. Or. Or.” McGregor says he’s become philosophical. “It’s going to take time. Be faithful. Keep on track. Do what has to be done and try to spread the word.” 



Progress Report

Whitefox Technologies Ltd.
Commissioning on its industrial demonstration scale membrane technology system started in June at Pacific Ethanol Madera LLC, a 40 MMgy ethanol plant in Madera, California. 
 
Hydro-Thermal Corp.
The company’s 200 proof vapor depressurization system is installed at Dakota Ethanol LLC,
a 50 MMgy ethanol plant in Wentworth, South Dakota.

Distillation Technologies Inc.
Proof of concept was achieved at bench scale for Bubble Spray Distillation, with an agreement
reached with Easy Energy Systems Inc. in June for pilot scale testing.

Drystill Holdings Inc.
Pilot-scale testing has been done on the company’s pass-through distillation technology
and discussions are under way for potential demo-scale testing.

Author: Susanne Retka Schill
Senior Editor, Ethanol Producer Magazine
701-738-4922
sretkaschill@bbiinternational.com

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