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Relief measure: CCEA hikes ethanol prices, purchase by OMCs will rise 30%

FE Bureau
Cabinet Committee on Economic Affairs, CCEA, sugarcane extracted ethanol, petrol, ethanol blended fuel, india oil import bill, sugar industry india, sugarcane farmers india, Indian Sugar Mills Association, GST ethanol, GST petrol, thanol blended petrol EBP,

The Cabinet Committee on Economic Affairs (CCEA) on Tuesday announced increases in the price of sugarcane-extracted ethanol, used for blending in petrol, in keeping with its stated, but under-implemented policy of encouraging ethanol-blended fuel to cut the country’s burdensome oil import bill and aiding the sugar industry and farmers.

For the year starting December, price of ethanol derived from C heavy molasses has been increased from `43.46 a litre to `43.75 per litre, and for B heavy molasses to `54.27 per litre from `52.43 earlier. Also, the price of ethanol from sugarcane juice, sugar, sugar syrup route has been fixed at `59.48 per litre.

Petroleum minister Dharmendra Pradhan said the higher prices would increase the procurement of ethanol by oil marketing companies to 260 crore litres between December 2019 and November 2020, from 200 crore litres bought in the previous ethanol year. The move, the minister said, would raise the ethanol blending in petrol to about 7% next year from 6% currently, and up to 10% by 2021-22

Ethanol is a by-product of molasses generated on crushing of sugarcane and the higher price is seen to help the sugar mills, which are burdened with high prices of cane fixed by the Centre and state governments. Cane-based ethanol can be produced three different ways - directly from cane juice, from B-grade and C-grade molasses.

Indian Sugar Mills Association (Isma) director general Abinash Verma said, "Government's decision to increase ethanol price once again, with special emphasis and a higher increase for ethanol made from B-heavy molasses, confirms its commitment towards encouraging more diversion of the surplus sugarcane/sugar into ethanol." He added that fixing a single premium rate for ethanol derived from partial or 100% sugar juice was a big positive.

The government said that all distilleries will be able to take benefit of the scheme and large number of them are expected to supply ethanol for the ethanol blended petrol (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, it claimed.

"Additionally, GST and transportation charges will also be payable (by oil marketing companies). OMCs have been advised to fix realistic transportation charges so that long distance transportation of ethanol is not disincentivised," Pradhan said. Consistent surplus of sugar production is depressing sugar prices and as a consequence, sugarcane farmer's dues have increased due to lower capability of sugar industry to pay the farmers.