Boost to ethanol blending

The Cabinet Committee on Economic Affairs (CCEA),  headed by Prime Minister  Narendra Modi, has finally  given its go ahead for fixing  a higher price for ethanol  derived from different sugarcane-based raw materials  under the Ethanol Blended  Petrol (EBP) Programme  for Ethanol Supply Year  (ESY) 2021-22 starting from  December.

The price of ethanol  extracted from sugarcane  juice has been increased to  Rs 63.45 per litre from the  current Rs 62.65 per litre for  the supply year beginning  next month. The rate for  ethanol from C-heavy molasses has been increased  to Rs 46.66 per litre from  Rs 45.69 and that of ethanol  from B-heavy to Rs 59.08 per  litre from Rs 57.61.

This means that CCEA  has increased the basic  price of ethanol produced  from C-heavy, B-heavy molasses and sugarcane juice  by Rs. 0.97/ litre (or 2.1 per  cent), Rs 1.47/litre (or 2.6  per cent) and Rs 0.8/litre  (or 1.3 per cent) respectively  for the ethanol supply year starting December 2021. With distillery contributing  17-25 per cent of integrated sugar mills’ turnover, this  increase in ethanol prices  underpins continuation  of supportive regulatory framework for enhanced  ethanol blending.

Sector analysts expect  the operating margin of integrated sugar mills to expand by 30-50 bps pursuant  to price hike announced.  In addition, the price hike would encourage the industry to increase sucrose  diversion towards ethanol to improve the domestic sugar supply demand balances that will in turn support domestic sugar prices,  analysts feel.

Interestingly, oil marketing companies such as Indian Oil Corp (IOC), Bharat  Petroleum Corp Ltd (BPCL)  and Hindustan Petroleum  Corp Ltd (HPCL), which  procure ethanol from sugar mills and distilleries,  will also bear the GST and  transportation costs on the  ethanol procured for doping  in petrol.

Significantly, thanks  to growth in both quantity of ethanol supplied to  OMCs and the percentage  of blending over the years, the Centre had advanced its  target of E20 from 2030 to  2025, and E10 to 2022. However, India had produced  only 485 million gallons in  TE2020, against an annual  demand of almost 1 billion  gallon, and the rest is met  through imports mainly from the US.

The latest CCEA approval  will not only facilitate the  continued policy of the government in providing price  stability and remunerative  prices for ethanol suppliers  but will also help in reducing the pending arrears of  cane farmers and dependency on crude oil imports. It will also help in savings in  foreign exchange and bring  benefits to the environment.