Govt hikes procurement prices of ethanol for OMCs

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has given its approval for fixing higher ethanol price derived from different raw materials under the EBP programme for the forthcoming sugar season 2019-20 and ethanol supply year from 1 December 2019 to 30 November 2020.

Accordingly, the price of ethanol derived from C heavy molasses route will be increased from Rs43.46 per litre to Rs43.75 per litre, that of ethanol from B heavy molasses route will be increased from Rs52.43 per lit to Rs54.27 per litre and that of ethanol from sugarcane juice/sugar/sugar syrup route will be fixed at Rs59.48 per litre.

Additionally, GST and transportation charges will also be payable. OMCs have been advised to fix realistic transportation charges so that long distance transportation of ethanol is not disincentivised,

OMCs have been advised to continue to accord priority for procuring ethanol from sugarcane juice/sugar/sugar syrup, B heavy molasses C heavy molasses and damaged foodgrains/other sources, in that order,

The price revision will benefit all distilleries and a large number of them is expected to supply ethanol for the EBP programme. Remunerative price to ethanol suppliers will help in reduction of cane farmer’s arrears, in the process contributing to minimizing difficulty of sugarcane farmers.

Ethanol availability for EBP programme is expected to increase significantly due to higher price being offered for procurement of ethanol from all the sugarcane based routes, subsuming “partial sugarcane juice route” and “100 per cent sugarcane juice route” under “sugarcane juice route” and for the first time allowing sugar and sugar syrup for ethanol production. 

Increased ethanol blending in petrol has many benefits, including reduction in import dependency, support to agricultural sector, more environmental friendly fuel, lesser pollution and additional income to farmers.

The government has been implementing ethanol blended petrol (EBP) programme wherein OMCs sell petrol blended with ethanol up to 10 per cent. This programme has been extended to whole of India except union territories of Andaman Nicobar and Lakshadweep islands with effect from 1 April 2019 to promote the use of alternative and environment friendly fuels. This intervention also seeks to reduce import dependence for energy requirements and give a boost to agriculture sector.

Government has notified administered price of ethanol since 2014. The government announced differential price for ethanol based on raw material utilised for its production for the first time during 2018, which significantly improved the supply of ethanol thereby and its procurement by public sector OMCs from 380 litre in 2013-14 to an estimated over 2000 million litres in 2018-19.

Consistent surplus of sugar production is depressing sugar price. Consequently, sugarcane farmer’s dues have increased due to lower capability of sugar industry to pay the farmers. Government has taken many decisions for reduction of cane farmer’s dues.

There is also a demand from the industry to include sugar and sugar syrup for ethanol production to help in solving the problem of inventory and liquidity with the sugar mills.