Modi Government Raises Ethanol Price For Blending In Petrol By 25%

The government on Wednesday approved a 25 percent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol in a bid to cut surplus sugar production and reduce oil imports.

The Cabinet Committee on Economic Affairs raised the procurement price of ethanol derived from 100 percent sugarcane juice to Rs 59.13 per litre from Rs 47.13, Oil Minister Dharmendra Pradhan said at a news conference.

• The price for ethanol produced from B-heavy molasses, also called as intermediary molasses, was hiked to Rs 52.43 a litre from Rs 47.13.
• Price of ethanol produced from C-heavy molasses was reduced marginally to Rs 43.46 from Rs 43.7.

The process of diverting sugarcane juice for making ethanol, which can be then doped in petrol, is common across major sugar producing nations. Brazil tops the list where all the ethanol produced is directly made from sugarcane juice.

The move would help sugar mills quickly release arrears of cane farmers, which stand at over Rs 13,000 crore. As much as 40 percent of these dues are in Uttar Pradesh alone.

Ethanol blending in petrol would also help cut India's reliance on imported oil. The government is looking at scaling up the blending to 10 percent in the next couple of years from 4-5 percent now.

“Oil marketing companies are advised to prioritise ethanol from 100 percent sugarcane juice, B-heavy molasses, partial sugarcane juice, C-heavy molasses, and damaged food grains and other sources, in that order,” Pradhan said.

Also, oil marketing firms will pay goods and services tax and transportation charges.

Pradhan said the decision will reduce excess sugar in the country, increase liquidity with the sugar mills for settling cane farmers' dues and make higher ethanol available for Ethanol Blended Petrol Programme. “Remunerative price to ethanol suppliers will help in reduction of cane farmers' arrears, in the process contributing to minimising the difficulty of sugarcane farmers.”

The government had launched the EBP programme in 2003 on a pilot basis which was subsequently extended to 21 states and four Union Territories to promote the use of alternative and environment-friendly fuels. Yet, the target of 10 percent blending of ethanol in petrol was never met.

Since 2014, the government notified an administered price for ethanol. The move significantly improved the supply of ethanol during the past four years. Ethanol procured by public sector oil firms has increased from 38 crore litres in ethanol supply year 2013-14 to an estimated 140 crore litres in 2017-18.