Cabinet approves hike in ethanol price for blended petrol scheme

The union cabinet on Wednesday approved a hike in the price of ethanol supplied to oil marketing companies for blending with petrol to Rs40.85 per litre, applicable for the forthcoming sugar season.

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi approved the revision in the price of ethanol under Ethanol Blended Petrol (EBP) Programme for supply to the state-run oil marketing companies.

The revised price of ethanol would be fixed at Rs40.85 per litre under EBP and will be applicable for the forthcoming sugar season 2017-18. GST and transportation charges will also be payable additionally.

The revised price will be applicable during ethanol supply period from 1 December 2017 to 30 November 2018, an official release stated.

A hike in ethanol prices will facilitate the government's policy to provide price stability and ensure remunerative prices for ethanol suppliers. It will also help in reducing dependency on crude oil imports, saving in foreign exchange and benefits to the environment, the release added.

In order to augment the supply of ethanol, the government in December 2014, decided to administer the price of ethanol under EBP programme. The price of ethanol during supply year 2014-15 and 2015-16 was fixed in the range of Rs48.50 to Rs49.50 per litre, including central/state government taxes and transportation charges.

Supply of ethanol by sugar mills has nearly tripled from 380 million litres during supply year 2013-14 to 1,110 million litres during 2015-16.

This price was re-examined for ethanol supply year 2016-17 in the context of firming of sugar prices and falling crude prices and consequent under-recoveries of OMCs.

The ex-mill price was revised to Rs39 per litre. Additionally, central / state government taxes and transportation charges were payable. It is estimated that for ethanol supply year 2016-17, about 650 million litres of ethanol will be procured.

Ethanol Blended Petrol (EBP) Programme, launched in 2003, has been extended to 21 states and 4 union territories to promote the use of alternative and environment friendly fuels. This intervention also sought to reduce import dependency for energy requirements.

However, since 2006, OMCs were not able to receive offers for the required quantity of ethanol against the tenders floated by them due to various constraints like state specific issues and supplier related issues, including pricing issues of ethanol.

OMCs have to start ethanol procurement process for the upcoming sugar season 2017-18 for which ethanol pricing under EBP Programme needs to be decided.