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OMCs finalise 140 crore litre of ethanol supplies against first tender
Thursday, 21 December, 2017, 08 : 00 AM [IST]
Our Bureau, New Delhi
After two rounds of offers, counter-offers and negotiations between sugar factories/ethanol manufacturers and oil marketing companies (OMCs), 140 crore litre of ethanol supplies have been finalised against the first tender invited in November 2017 for the supply period 2017-18 (i e between December 2017 and November 2018).

The previous highest ethanol supplies, made in the contract period 2015-16 (i e December 2015 and November 2016), were 111 crore litre, amounting to almost four per cent of the petrol consumption in the country. The 140 crore litre finalised now was 26 per cent higher than the supplies of 111 crore litre made in 2015-16.

The highest increase in ethanol quantities finalised was from the state of Maharashtra, which has finalised over 50 crore litre of ethanol supplies in 2017-18.

The last two years, the state experienced drought, which resulted in lower cane and molasses availability. Only 7.5 crore litre could be supplied in the 2016-17 season.

The 50 crore litre now finalised to be supplied from Maharashtra was more than six times the supplies made last year. This was because of the higher availability of sugarcane and molasses, as well as the better price for ethanol approved by the Central government.

Uttar Pradesh, nevertheless, continued to remain the highest ethanol-supplying state in the country.

Fifty-five crore litres had been finalised to be supplied to the oil depots in the state as well as those in the neighbouring states of Haryana, Punjab, Delhi, West Bengal etc.

This 55 crore litre was 34 per cent higher than the 41 crore litre supplied in 2016-17.  This increase was again due to the higher sugarcane and molasses availability in the current year, as well as the better ethanol prices approved by the Central government.

The third largest state supplying ethanol was Karnataka, where over 18 crore litre of ethanol supplies were finalised by the OMCs.

The sugar mills and the ethanol manufacturers in the three largest states (namely Uttar Pradesh, Maharashtra and Karnataka), will now together supply 123 crore litres out of the 140 crore litres finalised by the OMCs, contributing almost 88 per cent to the country’s ethanol supplies.

It is expected that 10 per cent ethanol blending would be achieved in the states of Uttar Pradesh and Maharashtra in sugar year 2017-18.

In the states of Delhi, Telangana and Uttarakhand, we should be achieving 8.9 per cent, 8.1 per cent and 8.7 per cent blending levels respectively, which again would be record blending percentages.

At an ex-distillery rate of Rs. 40.85 per litre of ethanol being offered by the OMCs and as approved by the government of India, the sugar mills and ethanol manufacturers would get around Rs 5,700 crore this year from the sale of ethanol.  This will be a big help to the sugar mills in paying the cane price to the farmers in their region.

The requirement for 10 per cent blending, shown by OMCs, was 313 crore litre and, therefore, the 140 crore litre of ethanol supplies finalised should allow the country to reach 4.5 per cent ethanol blending with petrol consumption in 2017-18.

Further, there are some more quantities which can be supplied, as and when another tender is invited around February 2018. Therefore, there is a very bright chance of achieving five per cent ethanol blending with petrol this year.

However, one important step that several state governments need to take is the removal of the taxes and duties from denatured ethanol, as also the unnecessary controls that the state excise departments exercise on movement of fuel-grade denatured ethanol, which are beyond the state powers.

Legislative and legal powers on denatured ethanol meant for blending with petrol is clearly and only with the Central government, which should be accepted by the state governments. The Karnataka government has already done so in mid-2017.
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