Expecting better cane production in the next sugar year, mills have committed to supplying one billion litres of ethanol to oil marketing companies for blending with petrol.
"In order to achieve the mandatory five per cent blending programme, oil marketing companies require 860 million litres of ethanol. But commitment of one billion litres has come from sugar the industry," Apurba Chandra, Joint Secretary, Ministry of Petroleum and Natural Gas, told reporters on the sidelines of a conference here.
Sugar year starts with October.
At a recent meeting of the empowered group of ministers, the government had fixed the interim price for ethanol at Rs 27 per litre, which is higher than the per litre production cost, he said.
The principle for finalisation of the final price is yet to be evolved for which the government has appointed an expert committee.
"Oil marketing companies are willing to take the entire one billion as their demand is more than the sugar industry can supply. While the oil industry is growing by 14 per cent year-on-year, I don't think sugar industry is growing by more than two per cent on long-term basis. So, it can't keep the pace," Chandra said.
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India has the capacity to produce three billion litres of ethanol a year, but it never reaches the full capacity since many of the installed capacity sat idle.
In fact, the less-than-required ethanol supply has in the past hampered the five per cent blending programme implemented in 2006 in 20 states and four union territories.
Government had in October 2008 made 10 per cent blending mandatory, but the tumbling of sugar cycle led to a large default.
Last year, it was decided that the procurement of ethanol would be done at a government-decided price, which would be reviewed every quarter.