PSU oil cos to buy ethanol at Rs 27 a litre

In a bid to salvage the ambitious ethanol-blended petrol programme, state-run oil firms have agreed to pay 25 per cent higher price at Rs 27 a litre for ethanol they will buy from sugar mills for doping petrol.

Indian Oil, Bharat Petroleum and Hindustan Petroleum have agreed for Rs 27 a litre price, against Rs 21.50 per litre currently, for three years, sources in the know said.

The companies will not float any new tender but will buy any ethanol offered at these rates. "Once availability of ethanol is established, the Cabinet Committee on Economic Affairs will be approached for fixing the ethanol price at Rs 27 a litre for three years," a source said.

The government had in 2006 mandated that ethanol should be blended in 5 per cent ratio with petrol. Subsequently, it stipulated that the amount of ethanol in petrol may be optionally ramped up to 10 per cent from October 2007 and made it compulsory with effect from October 2008.

But oil marketing companies (OMCs) — IOC, BPCL and HPCL — could not even implement the 5 per cent blend due to shortage of ethanol and Petroleum Ministry last month approached the Cabinet Committee on Economic Affairs (CCEA) for keeping the 10 per cent compulsory blending plan in abeyance.

The Cabinet had asked Petroleum Minister Murli Deora to ensure compulsory blending of 5 per cent ethanol in petrol and the higher price was a result of that, sources said.