Government Hikes Ethanol Price By Up To Rs 3.34/Litre

The government on Thursday hiked the price of ethanol extracted from sugarcane for doping in petrol by up to Rs 3.34 per litre as it looked to ramp up the programme that has benefited farmers and also helped cut down oil import bill.

The Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi raised the price of ethanol extracted from sugarcane juice to Rs 62.65 per litre from current Rs 59.48 per litre for the supply year beginning December 2020.

The rate for ethanol from C-heavy molasses has been increased from Rs 43.75 per litre to Rs 45.69 per litre and that of ethanol from B-heavy to Rs 57.61 per litre from Rs 54.27 per litre, I&B Minister Prakash Javadekar told reporters here.

India, which is 85% dependent on imports to meet its oil needs, allows doping of up to 10% ethanol in petrol with a view to cutting oil import and vehicular emissions as also offer a remunerative source for sugarcane farmers to sell their produce.

The steady rise in the price of ethanol paid by oil marketing companies has led to ethanol procurement jump to 195 crore litre in 2019-20 (December 2019 to November 2020) from 38 crore litre in 2013-14.

Oil marketing companies Indian Oil Corp. Ltd., Bharat Petroleum Corp Ltd. and Hindustan Petroleum Corp Ltd. will bear GST and transportation cost on the ethanol procured for doping in petrol, he said.

"Ethanol is very environment-friendly fuel with zero-emission," he said.

Previously there was only one rate of ethanol but the government has fixed different price for different sources of ethanol.

At present ethanol production is allowed from C-heavy molasses, B-heavy molasses, sugarcane juice or syrup or direct sugar. The ethanol procurement season by oil marketing companies will run from Dec. 1, 2020, to Nov. 30, 2021.

For the 2019-20 season that will end next month, sugar mills have so far offered around 195 crore litres of ethanol of which 142 crore litres (around 73%) has already been supplied to oil marketing companies.

The blending ratio is half of the 10% mandated by the government. For 2020-21, OMCs have projected a requirement of 465 crore litres of ethanol for meeting the 10% blending target. Sugar mills have an installed ethanol production capacity of around 3.55 billion litres which is expected to rise to around 4.66 billion litres in the next few years, thus enabling the mills to produce more ethanol.

"All distilleries will be able to take benefit of the scheme and a large number of them are expected to supply ethanol for the programme. Remunerative price to ethanol suppliers will help in the reduction of cane farmer's arrears, in the process contributing to minimizing the difficulty of sugarcane farmers," an official statement issued on the CCEA decision said.

The government has been implementing Ethanol Blended Petrol Programme wherein OMCs sell petrol blended with ethanol up to 10%. This programme has been extended to the whole of India except Union Territories of Andaman Nicobar and Lakshadweep islands with effect from April 1, 2019, to promote the use of alternative and environment-friendly fuels.

Government has notified administered price of ethanol since 2014. For the first time during 2018, the differential price of ethanol-based on raw material utilized for ethanol production was announced by the government.

"With a view to providing long term perspective to the stakeholders, the Petroleum Ministry has published 'Ethanol Procurement Policy on a long-term basis under EBP Programme'. In line with this, OMCs have already completed the one-time registration of ethanol suppliers.

"OMCs have further reduced the security deposit amount from 5% to 1% extending a benefit of around Rs 400 crore to ethanol suppliers," the statement said.

They have also reduced the applicable penalty on non-supplied quantity from earlier 5% to 1% extending a benefit of around Rs 35 crore to suppliers.

"Consistent surplus of sugar production is depressing sugar price. Consequently, sugarcane farmer's dues have increased due to the lower capability of the sugar industry to pay the farmers. Government has taken many decisions for reduction of cane farmer's dues," it said.