Cabinet Approves Mechanism for Procurement of Ethanol by Public Sector Oil Marketing Companies (OMCs) to Carry Out the Ethanol Blended Petrol (EBP) Programme

· Revision of Ethanol Price for Supply to Public Sector OMCs

[Cabinet Committee on Economic Affairs (CCEA) Press Release dated 27 June 2018]

The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi has approved the Mechanism for procurement of ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Programme- Revision of ethanol price for supply to Public Sector OMCs.

Now, CCEA has approved the following for the forthcoming sugar season 2018-19 during ethanol supply period from 1^st December 2018 to 30^th November 2019:

· To fix the ex-mill price of ethanol derived out of C heavy molasses to Rs.43.70 per litre (from prevailing price of Rs.40.85 per litre). Additionally, GST and transportation charges will also be payable.

· To fix ex-mill price of ethanol derived from B-heavy molasses and sugarcane juice at Rs.47.49 per litre. Additionally, GST and transportation charges will also be payable.

· As the price of ethanol is based on estimated FRP for sugar season 2018-19, it will be modified by MoP&NG as per actual Fair & Remunerative Price (FRP) declared by the Government.

· For ethanol supply year 2019-20, ethanol prices will be modified by MoP&NG as per normative cost of molasses and sugar derived from FRP of sugarcane.

All distilleries will be able to take benefit of the scheme and large number of them are expected to supply ethanol for the EBP programme. Remunerative price to ethanol suppliers will help in reduction of cane farmer's arrears, in the process contributing to minimizing difficulty of sugarcane farmers.

Ethanol availability for EBP Programme is expected to increase significantly due to higher price for C heavy molasses based ethanol and enabling procurement of ethanol from B heavy molasses and sugarcane juice for first time. Increased ethanol blending in petrol has many benefits including reduction in import dependency, support to agricultural sector, more environmental friendly fuel, lesser pollution and additional income to farmers.

Government has notified administered price of ethanol since 2014. This decision has significantly improved the supply of ethanol during the past four years. The ethanol procured by Public Sector OMCs has increased from 38 crore litre in ethanol supply year 2013-14 to estimated 140 crore litre in 2017-18.

The sugarcane and sugar production in this sugar season is very high leading to dampening of sugar prices. Consequently, sugarcane farmers’ dues have increased due to lower capability of sugar industry to pay the farmers. Government has taken many decisions for reduction of farmer's dues.

As realization from ethanol is also one of the components in revenue of sugar mills/distilleries, Government has decided to review the price of ethanol derived out of C heavy molasses.

Government is also deciding the price of B heavy molasses and Sugarcane juice for the first time which is likely to positively impact the capability of sugar industry to pay farmers dues and increase availability of ethanol for EBP Programme. This is also in line with the National Policy on Biofuels -- 2018 announced by the Government during May, 2018 which has widened the scope of raw material for ethanol production.

Background:

Ethanol Blended Petrol (EBP) Programme was launched by the Government in 2003 on pilot basis which has been subsequently extended to the Notified 21 States and 4 Union Territories to promote the use of alternative and environmental friendly fuels. This intervention also seeks to reduce import dependency for energy requirements and give boost to agriculture sector.