The inordinate delay in finalisation of prices and order placement for ethanol by the oil marketing companies (OMCs) is triggering new set of concern for the beleaguered sugar mills as crushing has begun for the 2013-14 season.
The OMCs – Indian Oil, Hindustan Petroleum and Bharat Petroleum – had come out with a tender in July to procure 133 crore litres of ethanol during December 2013-November 2014 to implement the mandatory 5 per cent blending programme.
In the previous tender, the discovered weighted price for procuring ethanol was Rs 37/litre on an ex-factory basis, while it was Rs 43 for delivery at the depot of the OMCs.
“It has been over four months since the tender was issued, but order for not even a single litre of ethanol has been placed so far,” a sugar industry source said. The undue delay in the completion of tendering process has resulted in lack of confidence in the programme among the mills.
With crushing set to gain momentum over the next couple of weeks, sugar mills – which have evinced interest in supplying to the OMCs – may have to grapple with storage issue and may have to incur additional costs.
Less bids OMCs, on the other hand, say they have received less than 50 per cent of the bids for the tender floated to buy about 133 crore litres.
About 80 technical bids committing some 62 crore litres, mainly from mills in UP, Karnataka, Gujarat and Tamil Nadu have been received by the OMCs.
Sugar mills are ready to commit higher supplies provided the OMCs offer a better price to their produce.
Interestingly, the response from mills in Maharashtra, a key producing States, has rather been poor to the tender.
“Mills in Maharasthra prefer to sell molasses in the open market and also export as they get a better price. There are no procedural delays to realise the proceeds,” a source said.
On January 2, the Government had set a June 30 deadline for OMCs for a mandatory 5 per cent ethanol blending in petrol.
The companies missed this deadline. It is now estimated that the Government can save up to $340 million in 2013-14 by implementing the 5 per cent blending programme.
The ethanol requirement of IndianOil Corp is estimated at 58.81 crore litres, followed by Bharat Petroleum at 38.10 crore litres and Hindustan Petroleum at 36.32 crore litres for the 2013-14.
Higher prices had earlier resulted in the Government directing the companies to scrap the international tender.