Cabinet approves mechanism for ethanol procurement, hikes prices

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi gave its approval for fixing higher ethanol price derived from different sugarcane based raw materials under the EBP programme for the forthcoming sugar season 2021-22 during ESY 2021-22 from 1 December 2021 to 30 November 2022.

The CCEA approved an increase in the price of ethanol derived from C heavy molasses route from Rs45.69 per litre to Rs46.66 per litre.

The price of ethanol from B heavy molasses route will be increased from Rs57.61 per litre to Rs59.08 per litre.

The price of ethanol from sugarcane juice, sugar / sugar syrup route will be increased from Rs62.65 per litre to Rs63.45 per litre.

Additionally, GST and transportation charges will also be payable.

It has been decided that oil PSEs should be given the freedom to decide the pricing for 2G ethanol as this would help in setting up advanced biofuel refineries in the country. It is important to note that grain-based ethanol prices are currently being decided by oil marketing companies (OMCs).

The approval will not only facilitate the continued policy of the government in providing price stability and remunerative prices for ethanol suppliers, but will also help in reducing the pending arrears of cane farmers and the country’s dependency on crude oil imports. This in turn, will help in savings foreign exchange while also bringing benefits to the environment.

The decision to allow oil PSEs to decide the price of 2G ethanol would facilitate setting up advanced biofuel refineries in the country.

All distilleries will be able to take benefit of the scheme and large number of them are expected to supply ethanol for the EBP Programme.

The government has been implementing Ethanol Blended Petrol (EBP) Programme wherein oil marketing companies 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 boost to agriculture sector.

The government has been notifying administered price of ethanol since 2014. For the first time during 2018, the government announced differential pricing of ethanol based on raw material utilised for ethanol production. These decisions have significantly improved the supply of ethanol, thereby increasing ethanol procurement by public sector OMCs from 380 million litres in Ethanol Supply Year (ESY) 2013-14 to over 3.50 billion litres in ongoing ESY 2020-21.

With a view to provide long term perspective to the stakeholders, the ministry of petroleum and natural gas has published “Ethanol Procurement Policy on a long-term basis under EBP Programme.” In line with this, OMCs have already completed the one-time registration of ethanol suppliers. OMCs have also published the names of eligible project proponents with whom long term agreements would be entered into for setting up ethanol plants in ethanol deficit states. The ministry has  directed OMCs to target 10 per cent ethanol blending in petrol by the end of ensuing ESY 2021-22 and 20 per cent by ESY 2025-26. As a step in this direction, the prime minister has released the Report of Expert Committee on “Roadmap for ethanol blending in India 2020-25” on World Environment Day – 5 June 2021. All these would facilitate ease of doing business and achieve the objectives of Atmanirbhar Bharat initiatives, says a government release.

Consistent surplus of sugar production is depressing sugar prices. This has affected the capability of sugar industry to pay cane farmers, leading to increase in dues to sugarcane farmers. Government has taken several 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. 

Now, 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 as well.

Further, to kick-start the Second Generation (2G) ethanol programme (which can be produced from agricultural and forestry residues, eg rice and wheat straw/corn cobs and stover/bagasse, woody biomass), a few projects are being set up by oil PSEs taking financial assistance from the `Pradhan Mantri JI-VAN Yojana’, approved by the CCEA in the past. These projects are likely to start commissioning from ensuing ESY 2021-22.