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| OMCs ready to pay Rs 26 a litre for ethanol |
| Ajay Modi / New Delhi Nov 23, 2009, 00:57 IST |
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But, sugar firms want Rs 28 a litre.
Following the recent decision of the Union Cabinet to continue with the mandatory 5 per cent ethanol blending with petrol, oil marketing companies (OMCs) have agreed to increase the price of ethanol from Rs 21.50 to Rs 26 a litre for a year.
However, the sugar industry is seeking Rs 28 a litre and, according to industry sources, only 40 per cent of the required quantity (680 million litres, for five per cent blending with petrol) would be available if the OMCs persist with the Rs 26 rate. Representatives of both OMCs and the sugar industry met in Mumbai earlier this week over the issue. OMC officials maintained that discussions are still on. However, sources said the sugar industry is agreeable to a price of Rs 26 per litre only if the OMCs enter into a three-year contract. “This will give the producers long-term assurance,” a sugar industry player said.
Sources also said the supply of ethanol needed to ensure five per cent blending with petrol was not an issue even this year, despite a lower sugarcane output.
“It is the price which is an issue. When the OMCs are using a tender process to purchase ethanol, they should buy from the lowest bidder. However, this has not been the case. They want to purchase through tenders and, at the same time, they want a fixed price,” a sugar industry source said.
A top petroleum ministry official said the ministry would soon call a meeting of all the stakeholders to examine the bottlenecks in five per cent blending. The OMCs had started ethanol procurement about three years earlier and were then offering Rs 21.50 a litre.
“This price was decided for a three-year period, which ended on October 31. Negligible amounts of blending are taking place at the moment,” the sugar player said.
With crude oil prices ruling above $75 a barrel, ethanol — at the higher price of Rs 26 a litre, compared with the earlier Rs 21.50 — would still be viable for the oil companies, said a senior oil company executive. However, the executive added that some issues still needed to be sorted.
Sources also said the current price of rectified spirit, a raw material for ethanol, is in the range of Rs 28-30 a litre and, therefore, the sugar industry is seeking a price of Rs 28.
The five per cent blending rule was introduced in November 2007. Ethanol is considered a ‘green’ fuel and blending will also help reduce India’s dependence on crude oil imports. Some OMCs also had plans to start ethanol production themselves. Hindustan Petroleum Corporation, for instance, bought two sick sugar mills in Bihar last year to produce ethanol.
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