OMCs to float tenders for ethanol procurement at Rs 27 per litre

Oil marketing companies (OMCs) will float tenders for ethanol procurement at Rs 27 per litre for a mandatory five per cent blending with petrol, once the Centre issues a notification in this regard.

A group of ministers (GoM) on ethanol recently decided to maintain status quo on its earlier decision by upholding a price of Rs 27 a litre for blending with petrol, till an experts, committee decides on future pricing. In an earlier meeting in April, the GoM had approved an interim price of Rs 27 for blending of petrol and ethanol.

Petrol prices are expected to reduce by at least Rs 1.25 to Rs 1.50 a litre with the five per cent ethanol blending.

“There is clarity for a moment that the price of ethanol to be procured from sugar mills has been fixed at Rs 27 per litre till the experts committee decides future price. Still, OMCs will have to float tenders to assess how much quantity suppliers can supply within a stipulated time. Tenders will be floated soon and subsequently suppliers will be assigned a particular quantity for supply,” officials at state-run Hindustan Petroleum and Indian Oil, who did not want to be quoted, told Business Standard.

Officials recalled that sugar mills were demanding that the price of Rs 27 per litre for ethanol (ex-factory) should be fixed for three years in the light of affordability by OMCs and cane and sugar prices. However, the GoM preferred to keep the price at Rs 27 a litre till the experts committee decides the future price.

The All India Ethanol Manufacturers Association welcomed the government’s decision. Vijaysinh Mohite-Patil, president of the association, told Business Standard: “Ethanol manufacturers are prepared to immediately start supply to OMCs. The annual requirement is estimated at 80 crore litre, which means the monthly supply of 6.5 to 7 crore litre at the all India level. Manufacturers do not see any problem to meet their commitments for next three years in view of bumper sugar crop.”

However, he said states needed to do away with export fee charged on interstate ethanol supply. He suggested an uniform rate on ethanol across the country.

According to Mohite-Patil, Maharashtra produces 920 million litre ethanol out of the country’s 1500 million litre. Uttar Pradesh produces 180 million litre, Chhattisgarh 150 million litre, Andhra Pradesh eight crore litre, Karnataka four crore litre and Tamil Nadu 25 million litre.

Cooperative sugar mills in Maharashtra said the five per cent ethanol blending at Rs 27 per litre would result in increase in molasses and the subsequent rise in their realisation.

Prakash Naiknavare, managing director of Federation of Cooperative Sugar Factories in Maharashtra, said, “Consistent offtake of ethanol would improve rectified spirit prices. Molasses storage problems, to some extent, would be solved. The factories would be able to pay good price to sugarcane growers. This would result in assured availability of sugarcane.”

Naiknavare said once ethanol blending programme was implemented in its true spirit, there would be permanent outlet (buyer) for ethanol and this would lead to overall financial improvement of sugar factories and cane growers.