OMCs inks 33% more ethanol supply deal with sugar mills

Data by ISMA show sugar mills signed 1,040 mn litres of ethanol supply contracts with OMCs for sugar year 2015-16 (Oct-Sept)

Oil marketing companies (OMCs) have decided to buy 33 per cent more ethanol for the current crushing season on increasing interest of sugar mills to participate under the government’s biofuel programme.

Data compiled by the apex industry body, Indian Sugar Mills Association (Isma), showed sugar mills have signed 1,040 million litres of ethanol supply contracts with the OMCs for the sugar year 2015-16 (October – September), against 780 million litres supplied in the past year, saving thereby Rs 5,000 crore of foreign currency outgo for fuel purchase. Ethanol is directly blended with petrol.

For the current year, however, OMCs had floated an expression of interest (EoI) a couple of months ago seeking 2,660 million litres of ethanol from sugar mills to achieve the 10 per cent mandatory blending target this year. With 1,040 million litres of contracted quantity, however, OMCs will be able to achieve less than four per cent this year. Sugar mills expect a follow up EoI from the OMCs for further ethanol supply assurance.

“We expect to contract for more ethanol supplies in the next couple of months for the upcoming season as and when EoIs are invited by OMCs,” said A Vellayan, president, Isma.

To achieve the blending target, however, sugar mills have urged the state governments, which are not permitting production of fuel ethanol or delaying excise permissions or creating impediments on inter-state movements by imposing taxes and duties on such an important fuel, should be convinced to remove these impediments. It will not only replace some of the imported petroleum and reduce foreign exchange outgo, but will directly benefit the sugarcane farmers in the country.

Meanwhile, Isma welcomed recent positive measures taken by the government of revival of the sentiment in sugar industry, including Rs 4.50 a quintal of cane subsidy to farmers, removal of excise duty, adoption of fixed pricing policy linked to cane, interest free loan of Rs 6000 crore and 4 million tonnes of sugar exports.