CCEA approves mechanism for procurement of ethanol by Public Sector Oil Marketing Companies (OMCs)

Delivered price of Ethanol may be fixed in the range of Rs 48.50 per litre to Rs 49.50 per litre

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister has approved a mechanism for procurement of Ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Program.

The CCEA approved replacing the current procedure on ethanol with the following:

* The delivered price of Ethanol may be fixed in the range of Rs 48.50 per litre to Rs 49.50 per litre, depending upon the distance of sugar mill from the depot/installation of the OMCs as per the slab given below:

a. 0-100 km at Rs 48.50 per liter

b . 101-300 at Rs 49.00 per liter

c. >300 at Rs 49.50 per liter

* The rates proposed would be delivered price at depot location and inclusive of all Central and State taxes, transportation costs, etc which would be borne by the Ethanol suppliers.

* The OMCs will incorporate "Supply or Pay" clause duly backed up with bank guarantee in their supply agreement with Ethanol suppliers.

* OMCs will sign MOU with the State Governments for a comprehensive system for uninterrupted inter-depot transfer of Ethanol within a State. This may include annual excise permits to OMCs for movement of Ethanol and other relevant measures.

EBP Programme was launched in 2003, which was extended to the entire country except NE States, J&K, A&N Islands and Lakshdweep, w.e.f, 1.11.2006. OMCs were directed to sell 5% ethanol blended petrol subject to commercial viability. A National Policy on Bio-fuels was also notified by the Government in 2009 with the objective to ensure that minimum level of bio-fuels is readily available to meet the demand at any given time.

In order to give fillip to the EBP program, the Government, inter alia, decided in November 2012 that 5% Ethanol blending with Petrol should be implemented across the country; procurement price of Ethanol will be decided between OMCs and the suppliers of Ethanol.

The present mechanism of procurement of Ethanol based on a benchmark price decided by OMCs may be replaced by a new mechanism of uniform price of Ethanol declared for each sugar year. M/o Consumer Affairs, Food & Public Distribution has stated that the ex-sugar mill price of Ethanol is around Rs 42.02 per litre. Besides, suppliers are required to incur additional cost of around Rs 6-8 per litre depending on the applicable state VAT, distance of sugar mill/distillery from OMCs' depot and the Excise duty. Thus, for Ethanol suppliers, the landed cost of Ethanol at the OMCs depots would be around Rs 49 per litre.

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