To provide price stability and remunerative prices to ethanol suppliers, the government on Thursday approved ​a new pricing mechanism for ethanol supply to public sector oil marketing companies (OMCs) to carry out the ethanol blended petrol (EBP) programme.

In line with the Cabinet decision, for the next sugar season, the administered price of ethanol for the EBP programme will be Rs 39/ litre during the ethanol supply period from December 1, 2016 to November 30, 2017, an official release said. The NDA government had, in December 2014, fixed a price of Rs 48.50-49.50/ litre for procurement of ethanol for blending with petrol.

“Additionally, charges will be paid to ethanol suppliers as per actuals in case of excise duty and VAT/ GST and transportation charges as decided by OMCs,” it added.

The Cabinet also decided that if the need arises to increase/ reduce the retail selling price of petrol by public sector OMCs, then “such increase/ reduction would proportionately factor in the requirement of maintaining the fixed cost of purchase of ethanol during the ethanol supply year.”

Also, the price of ethanol extracted from sugarcane will be reviewed and suitably revised by the government at any time during the ethanol supply period -- from December 1, 2016 to November 30, 2017 depending upon the prevailing economic situation and other relevant factors.

Abinash Verma, Director-General, Indian Sugar Mills’ Association (ISMA), while welcoming the decision on ethanol price, said “the government should find ways to compensate or give back the benefit of excise duty waiver announced in June 2015 but withdrawn prematurely in August 2016 to ethanol suppliers to ensure enough ethanol is contracted and supplied for the blending programme, especially since the ethanol price to suppliers has also been reduced.”

ISMA said the “double whammy has to be avoided. Incentives are essential over a longer period for a successful biofuel programme in the country".

The EBP programme was launched in 2003 and has been extended to the 21 states and four Union Territories to promote the use of alternative and environment-friendly fuels and reduce the country’s import dependence for energy needs.

“However, since 2006, OMCs have not been able to receive offers for the required quantity of ethanol against the tenders floated by them due to various constraints, including state-specific issues, supplier-related issues, including ethanol pricing issues,” the release said, adding that a new mechanism was needed to augment ethanol supply.

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