Oil-marketing companies raise prices of ethanol from maize, damaged food

New price applicable for the remaining 3 months of 2022-23 supply year

With Food Corporation of India (FCI) stopping the supply of concessional rice for blending with ethanol, oil-marketing companies (OMCs) have decided to increase the price of ethanol produced from damaged foodgrain (DFG) by Rs 4.75 per litre and that from maize by Rs 6.01 per litre for the remaining period of the 2022-23 ethanol supply year, which will end in October.

This will give relief to grain-based ethanol manufacturers, which were facing a crisis owing to the sudden cessation of concessional rice from FCI and were reluctant to opt for DFG or maize due to their low purchase price compared to sugarcane-based ethanol.

It will also help distilleries to absorb some of the impact from high-price maize and DFG.

Before it was stopped a few weeks back, FCI rice was available at Rs 20 per kg while ethanol produced from it was bought by OMCs at Rs 58.50 per litre.

In the case of maize, industry sources said the purchase cost was around Rs 22 per kg but the ethanol produced before the latest revision fetched a lower price of Rs 56.35 a litre.

DFG was available at Rs 23-24 per kg but the ethanol produced from it fetched a price that was the lowest of all at Rs 55.54 per litre.

After the recent revision, which would be applicable in the next few days, the purchase price of ethanol produced from DFG will be Rs 60.29 per litre while that of ethanol produced from maize will be Rs 62.36 per litre.

The interim relief, according to a communication by the OMCs, will enable distilleries to change their feedstock from FCI rice to maize and DFG, which has been allowed in view of the embargo on the release of surplus rice by FCI.

Grain-based distilleries have in general welcomed the move as a way to end the imbroglio surrounding the blending programme ever since FCI stopped giving rice at concessional rates for making ethanol.

Sources said there had been no communication from the government so far as to when the supplies of FCI rice at concessional rates would resume.

A few days ago, Food Secretary Sanjeev Chopra had told reporters the government was aware of the problem distilleries were facing.

“This issue is under our consideration. We are aware of the problem. Very shortly, we will take a suitable decision,” Chopra had said.

Till early July (of the 2022-23 ethanol supply year), around 3.51 billion litres of ethanol had been supplied by sugarcane- and grain-based ones.

Around 2.85 billion litres, or roughly 82 per cent, of that was from sugarcane-based sources and 0.66 billion litres, or 18 per cent, from grain-based ones.

Suppliers of sugarcane-based ethanol have contracted 3.90 billion litres in the 2022-23 supply year and delivered till early July around 2.85 billion litres, or around 76 per cent of their target.

In contrast, grain-based ethanol players have contracted around 1.64 billion litres and supplied just about 40 per cent.

Basically, ethanol is produced in India from two types of feedstock.

The first is sugarcane and second is grain, which includes rice supplied at concessional rates from FCI depots, maize, and finally DFG (which essentially is broken rice).

Of the items used for making ethanol from grain, FCI rice is the most preferred because it has a high starch content, 70-71 per cent, which is beneficial for ethanol.

Maize has a starch content of around 66 percent while that for DFG is lower. DFG has impurities and is usually high on moisture, all bad for ethanol making.