Rising prices of sugarcane has triggered the need to raise the price.
An expert committee under the Planning Commission is likely to peg the price of ethanol in the range of Rs 28-30 a litre.
Official sources close to the development said rising prices of sugarcane had triggered the need for a higher price of ethanol, currently priced at Rs 27 a litre, set in the interim.
The sources also said the committee would work out a formula for setting the price of ethanol quarterly. The formula might link the price to those of petrol or crude — worked out as the ‘refinery gate price’ adjusted with excise payments — and also to the price of sugarcane. “Linking it to the price of sugar will take care of the volatility and current market trends in sugarcane production while pricing ethanol,” they said.
The committee, which is aiming at a mandatory 5-10 per cent ethanol blending programme, may propose an import parity price for ethanol. “This will be helpful if we start importing ethanol for the blending programme. IPP, or import parity price, is calculated by adding up benchmark price, freight, insurance and loss and port landing charges. Internationally, the benchmark price is derived from the Brazilian ethanol price since its prices are lowest in the world due to abundant domestic supply and lowest cost of production,” the sources added.
The committee may also propose for opening up import of ethanol for petroleum companies under open general licence (OGL) and waiving the import duty from the current 7.5 per cent. Already the government is considering a proposal for rationalising the import duty on ethanol to increase supply for the ongoing blending programme. Currently, only chemical companies are entitled to import ethanol under OGL.
The government also proposes to strengthen port infrastructure for storage of ethanol, quality control measures, incentives like low-cost loan for agri-ethanol firms to encourage ethanol production. “We need 99 per cent pure anhydrous ethanol for blending and quality checks are necessary to ensure that the imported ethanol derived from corn and cassava crops other than sugar is as good as domestic ethanol,” official sources said.
Currently, the ethanol blending programme is not mandatory for the states. According to sources in oil companies, till date the ethanol off-take by the oil companies stands at only six per cent of the total volume and rest is in tanks.
While the Ministry of Chemicals and Fertilizers has recommended for free pricing of ethanol based on market demand and supply conditions, oil companies have contracted availability of 700 kilolitres of ethanol as against the annual estimated demand of 1,000 kilolitres from the sugarcane-based ethanol manufacturers.
Besides, states like Madhya Pradesh, Rajasthan, Chhattisgarh and West Bengal have not ordered for any procurement. Companies in Tamil Nadu have applied for procurement but the state government has not yet approved the blending programme.
