Cabinet Raises Ethanol Price for Supply to Public Sector OMCs

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, has approved the mechanism for procurement of ethanol by public sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Programme. It has also announced revision in the price of ethanol paid by the OMCs to sugar mills for the forthcoming sugar season 2018-19 (December 1, 2018 to November 30, 2019).

The ex-mill price of ethanol derived out of C heavy Molasses has been raised to Rs. 43.70 per litre, from the prevailing price of Rs. 40.85 per litre, while the ex-mill price of ethanol derived from B-heavy molasses and sugarcane juice has been raised to Rs. 47.49 per litre. Additionally, GST and transportation charges will also be payable.

High sugar production and suppressed prices

Sugarcane and sugar production in this sugar season is very high, leading to dampening of sugar prices. Consequently, dues by sugar mills to sugarcane farmers have increased, due to lower capability of the sugar industry to pay the farmers. As realization from ethanol is one of the components of revenues for sugar mills/distilleries, Government has decided to review the price of ethanol derived out of C heavy molasses.

According to the government, a remunerative price to ethanol suppliers will help in reduction of cane farmer’s arrears, in the process contributing to minimising difficulty of sugarcane farmers.

Ethanol availability for the EBP programme is also expected to increase significantly due to higher price for C heavy molasses based ethanol and enabling procurement of ethanol from B heavy molasses and sugarcane juice for first time. The latter is in line with the ‘National Policy on Biofuels 2018’ announced by the Government in May 2018, which has widened the scope of raw material for ethanol production to include direct production from sugarcane juice.

As the price of ethanol is based on estimated Fair and Remunerative Price (FRP) for sugar season 2018-19, it will be modified by Ministry of Petroleum & Natural Gas (MoP&NG) as per actual the price declared by the Government. For ethanol supply year 2019-20, Ethanol prices will be modified by MoP&NG as per normative cost of molasses and sugar derived from FRP of sugarcane.

The ethanol procured by public sector OMCs has increased from 38-crore litres in ethanol supply year 2013-14 to estimated 140-crore litres in 2017-18.

The EBP programme was launched by the Government in 2003 on pilot basis, which was subsequently extended to the Notified 21 States and 4 Union Territories to promote the use of alternative and environmental friendly fuels. This intervention also seeks to reduce import dependency for energy requirements and give boost to the agriculture sector.