Vijay Mallya-owned United Spirits (USL) is planning to use grain to produce its liquor.

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The move comes as a result of an expected decline in the production of molasses, a key ingredient derived from sugarcane, and a likely rise in its prices.

Company sources said this would not lead to any price change in its whiskey and rum brands that use grain.

USL has adopted a policy of bulk stocking of raw material. Additionally, an aggressive grain procurement programme has been leveraged to the company’s advantage because of large and early volume commitments, Prakash Mirpuri, vice-president, corporate communications of the United Breweries Group, USL’s parent company, told Financial Chronicle.

Mirpuri said the company planned to continue with the procurement of grain though it would use molasses and grain interchangeably, according to the market requirement. “We have engaged in a policy of brimful stocking (grain) since the costs (of molasses) started rising,” he added.

Molasses is used in manufacturing Indian made foreign liquor, which is produced after boiling and processing sugarcane juice.

As regards grain-based alcohol, Sandeep Verma, director of the Institute of Bar Operations and Management, said, “Using grain will help the company compete with international brands”.

According to the National Federation of Cooperative Sugar Factories, molasses production has fallen considerably over the past three years, from 131.11 lakh tonne in the 2006-07 season to 72.50 lakh tonne for the 2008-09 season. This explains the price increase to around Rs 525-550 a quintal at present from Rs 430 a quintal in October last year, according to data given by the All India Distillers Association.

According to a commodity exchange source who did not wish to be quoted, the price of maize at present is Rs 803.5 a quintal compared with Rs 879 in October 2008; whereas the price of barley has significantly declined from Rs 1,150 a quintal in October 2008 to Rs 680-700 a quintal. At these prices, molasses still remain lower than barley and maize, which are used for production of liquor.