The government today marginally raised the price of sugarcane-extracted ethanol used for blending in petrol by a little less than Rs 2 per litre to Rs 40.85 from the supply year beginning December 1.
The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the revision in the price of ethanol paid by state-owned fuel retailers to Rs 40.85 per litre for sugar season 2017-18, an official statement said.
GST and transportation charges will also be payable additionally. The revised price will be applicable during ethanol supply period from December 1, 2017 to November 30, 2018.
"The approval will facilitate the continued policy of the Government in providing price stability and remunerative prices for ethanol suppliers," it said. "It will also help in reducing dependency on crude oil imports, saving in foreign exchange and benefits to the environment."
The Cabinet had in October last year approved a new mechanism for revising price of ethanol used for blending in petrol.
The price of ethanol, according to the mechanism, was to be determined on the basis of prevalent price of sugar in the open market as also demand-supply situation.
The government had in December 2014 fixed a price of Rs 48.50-49.50 per litre for procurement of ethanol for blending with petrol. The actual rate paid to sugar mills was Rs 42 after excluding excise duty, VAT and other levies as well as transportation cost.
The price continued for supply years 2014-15 and 2015-16 and helped improved significantly the flow of ethanol from 38 crore litres during supply year 2013-14 to 111 crore litres in 2015-16.
"This price was re-examined for ethanol supply year 2016 -17 in the context of firming of sugar prices and falling crude prices and consequent under-recoveries of oil marketing companies. The Ex-Mill price was revised to Rs 39 per litre.
"Additionally, Central/State Government taxes and transportation charges were payable," the statement said.
It is estimated that for ethanol supply year 2016-17, about 65 crore litres of ethanol will be procured.
Doping petrol with 5 per cent ethanol was launched in 2003 to promote the use of alternative and environment friendly fuels as also cut import dependence.
However, since 2006, oil firms were not able to receive offers for the required quantity of ethanol against the tenders floated by them due to various constraints like state specific issues, supplier related issues including pricing issues of ethanol.
"Oil marketing companies have to start the ethanol procurement process for the upcoming sugar season 2017-18 for which ethanol pricing under Ethanol Blended Petrol Programme needs to be decided," the statement said.
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