OMCs may have to raise price for ethanol to be procured for EBP 2014-15

Sugar mills will not be in a position to supply ethanol if they are not offered at least Rs 35-37 per litre this year

The food ministry has assured the sugar mills of an enhanced price of ethanol to be procured by the oil marketing companies to comply with the requirement of blending 5% ethanol with petrol.

According to sources, while the sugar mills have demanded a price of Rs 40 per litre, the oil marketing companies had procure it last year at Rs 30-32 per litre and are not willing to increase it much.

However sources said the sugar mills will not be a position to supply ethanol if they are not offered at least Rs 35-37 per litre this year.

Sources said, the oil marketing companies have already floated the tenders for procuring ethanol from sugar mills and shortly the procurement will be finalised. This is towards the meeting the mandatory ethanol blending program for the year 2014-15 which requires mixing 5% ethanol with every litre of petrol sold.

Ethanol Blending Programme (EBP) was launched to promote green fuel and reduce the oil import bill. As per an earlier estimate, the sugar industry had estimated that oil companies could have easily saved Rs 370 crore on their oil import bill if they had blended the 62 crore litre supplied by sugar mills in the past year.

The Cabinet Committee on Economic Affairs in November last year mandated five% ethanol blending in petrol sold after June 30, 2013. It also allowed oil companies to negotiate the price with domestic and overseas suppliers of the bio fuel. Given the import cost, the imported ethanol is steeply priced compared to the domestic ethanol.

The Indian sugar industry has the capacity to produce 250 crore litre of alcohol annually. Its major buyers are chemical industry, whose demand is 60 crore litre, potable alcohol industry, which sources 110 crore litre, and oil companies need around 100 crore litre annually, as per last year’s figure.

Meanwhile, the chemical industry filed three cases in the Competition Commission of India (CCI) for short supply of ethanol for the sector. Two were quashed while one is with the Supreme Court.

In its appeal to the apex court, Indian Glycols, reportedly has alleged cartelisation by sugar mills and oil companies and also submitted that with limited availability of molasses-based ethanol in the country, any diversion of ethanol e.g., to EBP " – ethanol blending programme shall adversely affect the very existence of the chemical industry in India."

For the year 2013-14, oil marketing companies (OMCs) bought a record 720 million litres of ethanol from the sugar mills for blending. Oil Corp Ltd, Hindustan Petroleum Corp and Bharat Petroleum Corp together have lifted 230 million litres ethanol out of the contracted 720 million litres.