Govt raises ethanol prices for fuel blending by OMCs

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi approved the fixing of higher prices for ethanol derived from different sugarcane-based raw materials under the EBP programme for the forthcoming sugar season 2020-21. The Ethanol Supply Year (ESY) 2020-21 starts on 1 December 2020 and ends on 30 November 2021.

Accordingly, the price of ethanol from C heavy molasses route will go up from Rs43.75 per litre to Rs45.69 per litre, that of ethanol from B heavy molasses route from Rs54.27 per lit to Rs57.61 per litre and that of ethanol from sugarcane juice / sugar / sugar syrup route will go up from Rs59.48 per lit to Rs62.65 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.

In order to offer fair opportunity to the localised industry within the state and reduce crisscross movement of ethanol, OMCs have been asked to decide the criteria for priority procurement of ethanol from various sources taking into account various factors like cost of transportation, availability, etc. This priority will limit to the excisable boundaries of the state / UT for production in that state / UT. Same order of preference will be given thereafter for import of ethanol from other states wherever required.

The government expects all distilleries to take benefit from the scheme and a large number of them supplying ethanol for the EBP programme. Remunerative price to ethanol suppliers will help in reduction of cane farmer’s arrears, in the process contributing to minimising difficulty of sugarcane 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 the whole of India except the 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 boost to agriculture sector.

Government has been notifying administered price of ethanol since 2014. However, from 2018, differential price of ethanol based on raw material utilised for ethanol production has been announced. The decision has significantly improved the supply of ethanol and subsequently, procurement by public sector OMCs increased from 380 million litres in Ethanol Supply Year (ESY) 2013-14 to over 1,950 million litres contracted in ESY 2019-20.

With a view to provide long term perspective to the stake holders, the petroleum ministry has published “Ethanol Procurement Policy on a long term basis under EBP orogramme”. In line with this, OMCs have already completed the one time registration of ethanol suppliers. OMCs have further reduced the security deposit amount from 5 per cent to 1 per cent extending benefit of around Rs400 crore to ethanol suppliers. OMCs have also reduced the applicable penalty on non-supplied quantity from earlier 5 per cent to 1 per cent extending benefit of around Rs35 crore to suppliers. All these would facilitate ease of doing business and achieve the objectives of Atmanirbhar Bharat initiatives.

Consistent surplus of sugar production has been depressing sugar price, disincentivising sugar production and sugarcane cultivation by farmers. Farmers’ 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.

With a view to limit sugar production in the country and to increase domestic production of ethanol, the government has taken multiple steps, including, allowing diversion of B heavy molasses, sugarcane juice, sugar and sugar syrup for ethanol production. As the fair and remunerative price (FRP) of sugarcane and ex-mill price of sugar have undergone changes, there is a need to revise the ex-mill price of ethanol derived from different sugarcane based raw materials.