Ethanol price fixed at Rs 27 per litre for blended fuel

Ethanol manufacturers have welcomed the Empowered Group of Ministers’ (EGoM’s) decision to fix a price of Rs 27 per litre for ethanol that will be blended with petrol. The price, however, has been fixed for only six months as against the manufacturers’ demand for three years.

Ethanol manufacturers said they would be able to meet the requirement of 800 million litres for 5 per cent blending as the sugar cycle was on an upswing.

The area under cane and sugarcane production is expected to increase and ensure higher availability of sugar and molasses over the next three years.

According to the manufacturers, the procurement would be done through supply contracts — ethanol manufacturers will pay a penalty for default in supply.

Union Agriculture Minister Sharad Pawar told Business Standard, “The price has been fixed till a committee headed by Planning Commission member Saumitra Chadhary takes a decision.”

Vijaysinh Mohite Patil, president of the Ethanol Manufacturers Association of India, said production capacity for ethanol in India was 1,480 million litres and the requirement for 5 per cent blending with petrol was nearly 800 million litres. “Ethanol manufacturers do not see any problem in supplying the required amount.”

However, oil marketing companies, which are bleeding due to rising underrecoveries, want further clarity. A senior official of an OMC said as a public sector undertaking, OMCs would always argue in favour of supplying ethanol through tendering. “As the ethanol price has been fixed for six months, it needs to be ensured that suppliers adhere to their schedules and commitments,” he said, on condition of anonymity.

Prakash Naiknavare, managing director of the Federation of Cooperative Sugar Factories in Maharashtra, said the key to the success of this project lay in the government making ethanol blending mandatory.

“OMCs need not go for tenders since the rate has already been fixed by the EGoM. OMCs can invite ethanol manufacturers to supply ethanol at designated depots at a fixed rate of Rs 27 per litre ex-distillery. The review of the process after the initial six months is not a bad idea as it will be fair to gauge the ground realities.”

Naiknavare said due to the EGoM’s decision, ethanol manufacturers would be able to use the idle capacity.