A Planning Commission expert committee may soon recommend a revised price for ethanol, currently pegged at an ad hoc price of Rs 27 a litre. Official sources said the commission will forward this to all ministries. It will then be finalised by a group of ministers (GoM). The revised price to be recommended by the commission may be a tad higher, in the range of Rs 28-29 a litre, sources said.
The price is the amount needed to procure ethanol by oil marketing companies (OMCs), to mix it with petrol up to five per cent of the total quantity, under the government’s ethanol blending programme (EBP) to minimise air and environment pollution. At present, OMCs procure ethanol from sugar mills to implement the five per cent ethanol blending with petrol at Rs 27 a litre. The government had decided on EBP in October 2007, which is not mandatory for states. In the 2011-12 marketing year (October-September), sugar mills have contracted to supply 600 million litres of ethanol to petrol companies, compared to 540 million litres contracted last year. They were able to supply only 300 million litres last year.
According to the agriculture ministry, the sugar industry produces 26 million tonnes of sugar and 3.5 billion litres of alcohol annually. Earlier, the planning commission suggested linking the ethanol price with the international price of petrol, with a discount of 20 per cent. While the ministry of chemicals and fertilisers had recommended free pricing of ethanol, based on market demand and supply conditions, oil companies and sugar bodies wanted a fixed price for ensuring offtake.
Last year, the final report on the price of ethanol set by the committee was signed with dissent notes from the ministries of food and oil and natural gas. The report decided the price of ethanol to be Rs 26.76 a litre, followed by a quarterly revision of the price, based on a formula. It has also capped the ethanol for EBP at 500 million litres annually, as against the current requirement of 1,200 million litres. The committee, in its draft report, had stated that even if just 500 million litres were earmarked for the ethanol programme, then 500-700 million litres would be left for the chemical industry after meeting the demand of the potable sector.
The committee had also said in its draft report that it was ‘neither feasible nor appropriate to require that the alcohol-based chemical industry be effectively denied access to domestically produced alcohol’. However, due to differences of opinion among ministries, the price was not adopted and the industry continued to procure ethanol at the old price of Rs 27 a litre.
While the food ministry had dissented to both the price and caps suggested for ethanol under EBP, the petroleum and natural gas ministry objected to the caps suggested.
Since ethanol is prepared as a by-product of sugar from cane in India and is also used as an industrial chemical, the operational ministries represented in the Planning Commission committee are oil and natural gas, food and chemical and fertiliser.