In a bid to promote eco-friendly fuel, the Indian government has approved the mechanism for revision of ethanol price for supply to Public Sector Oil Marketing Companies (OMCs).
The nod was given at Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi today to carry out the Ethanol Blended Petrol (EBP) Programme effectively.
Following this, the administered price of ethanol for the EBP Programme will be Rs 39 per litre for the next sugar season 2016-17 during ethanol supply period from December 1, 2016 to November 30, 201.
In addition, charges will be paid to the ethanol suppliers as per actuals in case of Excise Duty and VAT/GST and transportation charges as decided by OMCs.
If it is required to increase/reduce the retail price of Petrol by OMCs, then such increase/reduction would proportionately factor in the requirement of maintaining the fixed cost of purchase of ethanol during the ethanol supply year.
The government will review and suitably revise ethanol prices at any time during the ethanol supply period depending upon the prevailing economic situation and other relevant factors.
The revision in ethanol prices will facilitate the continued policy of the government in providing price stability and remunerative prices for ethanol suppliers.
In 2003, the government has launched EBP Programme and it has been extended to the notified 21 States and 4 Union Territories to promote the use of alternative and eco-friendly fuels.
This programme was implemented also to reduce import dependency for energy requirements.
However, since 2006, OMCs were not able to receive offers for the required quantity of ethanol due to various constraints like State Specific issues, Supplier related issues including Pricing issues of ethanol.
In order to augment the supply of ethanol, a need was felt to put in place a new mechanism for pricing of ethanol.
Accordingly, on December 10, 2014, the government has decided that the delivered price of ethanol at OMC depots would be fixed in the range of Rs 48.50 per litre to 49.50 per litre including Central/State Government taxes and transportation charges.
The decision has helped in significantly improving the supply of ethanol. Ethanol supplies increased to 67.4 crore litres in 2014-15 and the projected supplies for ethanol supply year 2015-16 are around 120 crore litres.
The objective to fix the delivered price of ethanol has been achieved to a large extent. In view of firming of sugar prices, falling crude prices and consequent under-recoveries of OMCs on this account, a need to re-examine the pricing of ethanol under EBP Programme has been felt.
In a bid to reduce import dependence, the government had in 2003 commenced doping petrol with 5 per cent ethanol. The quantity was to be raised to 10 per cent.