OMCs likely to get less ethanol for blending

The sugar industry has offered to sell 610 million litres of ethanol, valued at Rs 1,650 crore, to oil marketing companies (OMCs) for blending with petrol in the next sugar season beginning October. The quantity offered is much lower than the requirement of around 1,010 mll stated in the tender which had invited bids for supply.

Renuka Sugars is learnt to have offered the highest quantity of 90 mll, followed by Bajaj Hindusthan (80 mll) and Balrampur Chini (36 mll) in the tenders opened late on Friday evening. These companies will realise an interim price of Rs 27 per litre.

The quantity is also lower, compared to what the top sugar companies had offered in last year’s tenders. Last year, Renuka Sugars offered 120 mll, Bajaj Hindusthan had offered to supply 100 mll and Balrampur had offered close to 40 mll.

“The reason behind companies not offering higher quantities is the lack of clarity on pricing. Once the pricing formula is fixed and a supplementary tender is floated, more will be offered,” explained Narendra Murkumbi, managing director, Renuka Sugars.

The current price is temporary and expected to go up if the government accepts recommendations of the Saumitra Chaudhuri committee. The latter has suggested linking ethanol to petrol prices of the previous quarter, after making adjustments for ethanol’s calorific value, mileage and tax incentives. The committee, set up to suggest a pricing mechanism for ethanol, had also recommended that 400 mll be capped for blending to ensure supply to the alcohol-based chemical industry.

However, the OMCs have floated tenders for 1,010 mll, as the committee recommendations are yet to be implemented.

Industry officials also said while the OMCs had desired to purchase 1,010 mll, the actual requirement was much lower, since a number of states had not allowed ethanol blending due to the requirement of molasses (the primary raw material of ethanol) for potable industry use.

Abinash Verma, director general of the Indian Sugar Mills Association, said, “The requirement for blending use would come down to about 745 million litres of ethanol in the 2011-12 sugar season as states like Tamil Nadu, West Bengal, Orissa, Madhya Pradesh and Jharkhand have not allowed blending, while it has not yet started in Rajasthan. These states together would have required 275 million litres.”

He added since the standalone distilleries which had offered to supply 300 mll last year were declared ineligible at the time of tender bids, owing to their inability to establish direct linkage with domestic molasses at the time, these have largely kept out. If the linkage was required to be established at the time of actual supply and not during the tender, much more quantity would have been offered, he said.