Govt increases procurement price of ethanol produced from all sources

The government on Tuesday increased the procurement price of ethanol produced from all sources for the 2019-20 season and also expanded it to include ethanol made from sugarcane syrup and sugar. This was done to further absorb surplus sugar.

The decision, by the Cabinet Committee on Economic Affairs, comes at a time when the Centre is expecting at least 28 per cent increase on savings in crude oil import bill through ethanol blending for the financial year 2019-20 (FY20) at Rs 7,000 crore, compared to Rs 5,456 crore in FY19 and Rs 5,070 crore the previous year. The ethanol procurement season for the oil marketing companies (OMCs) — Indian Oil Corporation, Bharat petroleum Corporation and Hindustan Petroleum Corporation — will run from December 1, 2019, to November 30, 2020.

According to the new rules, the price of ethanol derived from C heavy molasses has been increased from Rs 43.46 a litre to Rs 43.75 per litre, and for B heavy molasses to Rs 54.27 per litre from Rs 52.43.

Also, the price of ethanol from sugarcane juice, sugar and the sugar syrup route has been fixed at Rs 59.48 per litre, up from Rs 59.19 a litre. That apart, OMCs have been entrusted with the task to purchase ethanol produced from broken and damaged grains at a mutually agreeable price. “This will give savings to our crude oil import bill and bring more revenue for the farmers,” said Petroleum Minister Dharmendra Pradhan.

Based on July estimates by the Ministry of Petroleum and Natural Gas, the country’s crude oil import bill for FY20 is at Rs 8 trillion, compared to Rs 7.83 trillion last year. 

The government also decided to have a fixed procurement policy for the next five years with regular upward revision in prices to ensure a stable policy environment to sugar mills.

For the 2019-20 sugar season, which will start from October, the government has fixed a target of producing 2.6 billion litres of ethanol, up from 2 billion litres during the current sugar season.

“As against a blending of 6.20 per cent achieved in 2018-19, we have now targeted to blend around 7 per cent petrol with ethanol in 2019-20 which will lower our annual crude oil import dependency by 2 million metric tonnes,” Pradhan told reporters on Tuesday.

OMCs will also be required to pay the goods and services tax and transportation cost for the ethanol. “When we took over in 2014-15, just around 380 million litres of ethanol was produced annually, which has now risen to over 2 billion litres,” Pradhan said.

The Centre’s decision to increase the price of ethanol comes close on the heels of its over Rs 6,000-crore export subsidy to sugar mills to enable them to ship around 6 million tonnes of the sweetener next year.

It had earlier approved creation of a buffer stock of 4 million tonnes. All the measures are meant to absorb the excess sugar in the country and improve liquidity position of mills which in turn will help them in clearing the sugarcane dues accruing to farmers estimated to be over Rs 10,000 crore in 2018-19.

The sugar industry welcomed the move as it gave much-needed clarity on their investments.

Abinash Verma, director General of Indian Sugar Mills Association, said in a statement that the decision to increase ethanol price once again, with special emphasis and a higher increase for ethanol made from B-heavy molasses, confirms the government’s commitment towards encouraging more diversion of the surplus sugarcane and sugar into ethanol. 

He said allowing a single premium price for the ethanol made from partial or 100 per cent sugarcane juice is another big and positive step in this direction and will further increase the ethanol blend levels from the current 6 per cent average levels across the country. 

India is expected to start the 2019-20 sugar season with an all-time high opening stock of 14.5 million tonnes as against a requirement of 3-5 million tonnes and end the season with stocks of 16.5 million tonnes in hand.

India’s sugar output is likely to be 32.95 million tonnes in the current 2018-19 marketing year (October-September), as against the annual domestic demand of 26 million tonnes. However, in the coming season (2019-20), output is expected to fall to around 28 million tonnes mainly because of drought in the major growing states.

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