Ethanol price to be cut as sugar rates rise

The petroleum ministry will decide the price that needs to be paid to sugar mills for ethanol

The government is all set to reduce the price of ethanol at which oil marketing companies (OMCs) buy

from sugar mills for blending with petrol as price of sugar is on the rise.

The petroleum ministry will decide the price that needs to be paid to sugar mills for ethanol during the

next sugar season starting December and it may not be same as this year, a government official said.

Last year, the ethanol price was fixed on the higher side to help sugar mills pay cane arrears to farmers,

the official pointed out. The price may be revised lower as mills’ realisation from sugar has improved, he

said. While fixing the rate for ethanol, the government would also take into account how much

sugarcane would be available for crushing.

The government had fixed Rs 42 per litre as ex-mill price for ethanol supplied for blending with petrol

during 2015-16 season (November to October). The oil marketing companies have not lowered the

buying rate of ethanol even though globally crude oil prices have fallen as the biofuel’s rate was fixed by

the cabinet.

Sugar mills have agreed to supply 1,200 million litres of ethanol after bids were invited by the OMCs

such as Indian Oil, HPCL and BPCL, he said. The requirement is 1,300 million litres to achieve 5 per cent

blending with petrol. The government has since raised the target to 10 per cent.

Last year, the country achieved 2.5 per cent ethanol blending with petrol as sugar mills had supplied 660

million litres of ethanol. India needs to produce 2,660 million litres to meet 10 per cent blending.

The ethanol blending programme was first started during the AB Vajpayee-led NDA government in 2002

when it launched 5 per cent mixing with petrol in nine states and four Union territories. However, the

UPA government discontinued it in 2004 due to lower sugarcane production. Finally, when it relaunched

the programme in 2007, the actual procurement by OMCs started only in November 2012 and the same

year a national biofuel plan was unveiled targeting 20 per cent blending across the country.

About 130 sugar mills out of 500 have facilities to produce ethanol. The government has also allowed

ethanol production from other sources like corn, barley and damaged rice to augment availability.

Sugarcane production next season may drop to about 2,800 lakh tonnes if the acreage remains at about

40 lakh hectares as seen from the current progress in planting. The government, however, has fixed a

target of 3,550 lakh tonnes output for cane. The country had produced 3,467 lakh tonnes of sugarcane

in 2015-16.

NGS INDIA