Cabinet raises ethanol procurement prices effective December 1

To achieve the 20 per cent blending target by 2025, India will need to produce 10-11 billion litres of ethanol
The central government on Wednesday increased the procurement price of all three categories of ethanol produced from different sources by 1.27-2.55 per cent for the 2021-22 season, which begins from December 1.

For ethanol produced from second generation sources that include grain-based sources, such as broken unused rice, wheat or corn, the Cabinet Committee on Economic Affairs (CCEA) decided to leave it to the oil public sector undertakings (PSUs) to determine the price at which they would want to purchase it.

“It is important to note that grain-based ethanol prices are currently being decided by oil marketing companies (OMCs) only,” according to an official statement released after the meeting of the CCEA.

Committed price support

Apart from fixing the new price for ethanol, the CCEA also approved a Rs 17,408.85 crore “committed price support” for the Cotton Corporation of India (CCI) for seven cotton seasons from 2014-15 to 2020-21.

The expenditure was approved for reimbursing losses under MSP operations for cotton during the cotton season (October-September) 2014-15 to 2020-21.

Jute packaging

The Cabinet also approved reservation norms for mandatory use of jute in packaging for the jute year 2021 -22 (July-June). The norms provide for 100 per cent reservation of foodgrain and 20 per cent of sugar to be compulsorily packed in jute bags. Meanwhile, according to the CCEA decision, for ethanol produced from C-heavy molasses, the new price for the 2021-22 season will be Rs 46.66 per litre, up from Rs 45.69 per litre in the current season, a jump of around 2.12 per cent, while the procurement price for ethanol produced from B-heavy molasses for OMCs, also known as intermediary molasses, for the 2021-22 season will be Rs 59.08 per litre, an increase of 1.47 per cent from the current year. The procurement price of ethanol produced from sugarcane syrup, juice or direct sugar for the 2021-22 season will be Rs 63.45 per litre, an increase of 0.80 per cent from the current year. (See chart) As has been the norm so far, the OMCs that buy ethanol at the pre-fixed price will pay the GST and transportation charges as well.

“With distilleries contributing 17-25 per cent of integrated sugar mills’ turnover, this increase in ethanol prices underpins continuation of a supportive regulatory framework for enhanced ethanol blending. We expect the operating margin of integrated sugar mills to expand by 30-50 bps pursuant to price hike announced,” Rating agency ICRA said.

To achieve the 20 per cent blending target by 2025, India will need to produce 10-11 billion litres of ethanol, of which 6-6.5 billion litres will come from sugarcane, while the rest will have to be contributed by corn and grain-based sources.

To produce this quantity, a capacity of 12 billion litres of ethanol will have to be installed, of which 6.5-7 billion litres would be from sugarcane and the rest from corn-based distilleries.

At present, the total ethanol production capacity is just about 6 billion litres, of which that produced from sugarcane sources is 5.25 billion litres, while that from corn-based distilleries is just 0.75 billion litres.

‘No cotton procurement by CCI this year’

Talking to reporters after the Cabinet meeting, Union Textiles Secretary Upendra Prasad Singh said the CCI might not need big procurement operations this year 2021-22 (October-September) from farmers as the market price is higher than the minimum support price.

“Over the last two years, spinning mills were shut, resulting in lower consumption and prices, especially due to the outbreak of the pandemic. As a result, procurement was much more. Procurement of 22.5 million bales (1 bale=170 kg) was done in the last two years,” Singh said.

“We expect record consumption this year. Availability in the world market will also go down as China’s Xinjiang province’s production will also go down due to the US ban. Our production is expected to be the usual — around 35-36 million bales,” Singh said.

“This year, we don’t need to procure and no losses are expected to be incurred by the government. Right now we don’t need to intervene,” he explained.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel