Cabinet hikes ethanol prices, approves subsidy for non-urea fertilisers

The Union cabinet on Wednesday raised the prices of all three categories of ethanol that oil-marketing companies use for blending with petrol.
 

The rise is up to Rs 2.75 a litre and is for the 2022-23 supply season, which will start in December.
 

However, the sugar industry is of the view that a higher price of ethanol derived from sugarcane juice and syrup would have rekindled more investor interest.
 

The cabinet in a separate decision also approved a subsidy of around Rs 51,875 crore for phosphatic and potassic (P&K) fertilisers for the second half of 2022-23 as part of efforts to provide affordable soil nutrients to farmers.
 

In April, this year, it had approved a subsidy of Rs 60,939.23 crore for P&K fertilisers for the first six months (kharif season) of this fiscal year.
 

This means for non-urea fertilisers alone, the subsidy has touched almost Rs 1.13 trillion in FY23.
 

The urea subsidy is, according to conservative estimates, never less than Rs 80,000 crore a year.
 

The FY23 Budget had provided for Rs 1.05 trillion as total fertiliser subsidy.
 

Union Fertiliser Minister Mansukh Mandaviya told reporters the subsidy burden in FY23 was expected to be around Rs 2.25 trillion.
 

For the second half of FY23, the government has approved a subsidy of Rs 98.02 per kg for nitrogen (N), Rs 66.93 per kg for phosphorus (P), Rs 23.65 per kg for potash (K), and Rs 6.12 per kg for sulphur (S), under the nutrient-based subsidy (NBS) scheme.
 

Under the NBS scheme, implemented since April 2010, a fixed rate of subsidy used to be announced for nutrients -- nitrogen, phosphate, potash, and sulphur -- by the government annually. Now it is done every six months.
 

Meanwhile, in the case of ethanol, Sonjoy Mohanty, director general, Indian Sugar Mills Association, said the revision of the price of ethanol manufactured from sugarcane juice or sugar syrup was not enough to drive additional investment.
 

The industry has on several occasions told the government the price of ethanol produced from sugar juice or syrup should be based on returns on equity (RoE) with a payback period of five years.
 

The derived price based upon RoE works to Rs 69.85 a litre.
 

“The price of Rs 65.61 a litre announced by the government today (Wednesday) would still make investors shy away from the much-needed infusion into the sector for ethanol capacities,” Mohanty said in a statement.
 

However, Petroleum Minister Hardeep Singh Puri, reacting to the cabinet decision, said the Centre was confident of reaching the targeted 12 per cent ethanol blending by next year.
 

“The target of 20 per cent ethanol blending is still on track for 2023-24. However, it’s not known right now how the international scenario and energy prices will affect this target,” Puri said.
 

The Centre’s target of supplying petrol mixed with 10 per cent ethanol was achieved in June earlier this year, ahead of the original schedule of November 2022.
 

“We have saved about Rs 40,000 crore in forex outgo from 10 per cent blending, besides benefiting the farmers,” Puri said, adding a pilot to start E-20 (petrol with 20 per cent ethanol) will start in April next year at select petrol pumps.
 

The minister said 4.52 billion litres of ethanol was blended with petrol during the supply year ended November 30, 2022.

For the next year, the government has released tenders for procuring 5.40 billion litres.