Govt to align ethanol price with global market

Oil Minister Dharmendra Pradhan said govt will move towards market dynamic pricing system

After paying a fixed price for ethanol used for doping in petrol, the government said it will move towards 'market dynamic' pricing system where rates would move in tandem with international trend.

In a bid to boost agrarian economy, the government had in December 2014 fixed a price of Rs 48.50-49.50 per litre for ethanol public sector oil companies were to buy from sugar mills for blending with petrol. This rate is about 20% more than the current cost of producing petrol.

"We want to link the price to market dynamics. Government will move towards market dynamic pricing system," Oil Minister Dharmendra Pradhan said at conference on bio-fuels.

He said at present 10% sugarcane extracted ethanol is being mixed with petrol and sold in eight sugarcane producing states of Uttar Pradesh, Karnataka, Maharashtra, Andhra Pradesh, Telangana, Haryana, Delhi and Bihar.

At the remaining places, 5% ethanol is being mixed in petrol.

Also, doping of non-edible oil, called bio-diesel, in diesel will begin this fiscal with 11 crore litres being contracted, he said.

Pradhan said with India's fuel demand slated to rise exponentially, ethanol and bio-diesel market of Rs 6,500 crore can jump to Rs 1 lakh crore in next few years.

By 2022, 450 crore litre of ethanol, costing about Rs 23,000 crore, and 675 crore litre of bio-diesel, worth Rs 27,000 crore, would be required considering a nominal fuel growth of 5-6%, he said adding the requirement would be substantially higher if the 2014-15 and 15-16 growth average of 11-12% is taken.

Pradhan said the programme to mix ethanol extracted from sugarcane molasses was started in 2003 with a view to cut India's dependent on imports to meet its oil needs as well as provide remunerative price to sugarcane farmers but it lost steam with the change in government in 2004.

Against the requirement of minimum 120 crore litre of ethanol for meeting the mandatory 5% blending, only 30.6 crore litre was doped in 2011-12 which dropped to 15.4 crore litre in the following year.

While 5% blending was mandatory, the programme called for raising the level to 10%.

The NDA government after coming to power in 2014 decided to raise the price at which ethanol will be procured to Rs 48.5-49.5 per litre.

India consumes 2,800 crore litre of petrol and to meet 5% blending would need 140 crore litre of ethanol. India consumes 8,800 crore litre of diesel annually.