Government to purchase ethanol at Rs 21.50/litre

The government has decided to procure 1,061.04 million litre of ethanol from sugar mills at a flat rate of Rs 21.50 a litre over the next three years.

The decision has come as a relief to the beleaguered sugar industry, which is reeling under losses after prices of the sweetener fell by 40 per cent this season.

According to industry sources, the largest quantity of 217 million litre of ethanol (20.48 per cent of the total procurement) would be sourced from Shree Renuka Sugars followed by Bajaj Hindusthan with 99 million litre (9 per cent). The Maharashtra-based XL Telecom has committed to supply 8 per cent or 84.04 million litre.

Uttar Pradesh, with 21 nominated suppliers, leads with a total commitment of 362.34 million litre (34 per cent), followed by eight registered suppliers in Tamil Nadu (257.374 million litre or 24 per cent). Maharashtra is placed fourth with a total seven nominated suppliers, who have committed a supply of 140.52 million litre or 13 per cent of the total blending requirement.

The government needs 1,700 million litre for the next three years, but the industry has committed to supply only 1,061 million litre or 75 per cent of the total requirement. The industry seems to be in no mood to source the remaining 25 per cent through imports, as the landed cost of ethanol is about 15 per cent higher than the domestic prices. "The government will buy indigenous ethanol on priority. The import price of ethanol is Rs 25 a litre, higher than the domestic negotiated price of Rs 21.50 a litre. Hence, there is little change of importing ethanol," said Narendra Murkumbi, managing director of Shree Renuka Sugars.

The company is increasing the distillery production capacity to 110 million litre next year from the current 60 million litre.

"The capacity of distillery units has gone up this year. Therefore, we will have no problem in supplying ethanol according to the requirements of the oil companies," Murkumbi added.

Ethanol blending up to 5 per cent is mandatory, provided the fuel is made available to oil companies at reasonable price.

Oil marketing companies had invited public tenders for the procurement of ethanol at depots and terminals of the companies to implement ethanol-blended petrol, Dinsh Patel, minister of state for petroleum and natural gas, said recently in Rajya Sabha.

The public tenders have been invited for 3 years with an option to extend for two more years on mutual consent of both the parties. Of the 20 notified states and four Union territories, Uttar Pradesh, Delhi, Bihar, Jharkhand, Goa, Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka had finalised tenders for ethanol supply. Contracts in other regions were expected to be signed very soon, the minister added.