OMCs up ethanol procurement price as part of 6-months relief package

Jun 10,2022

OMCs up ethanol procurement price as part of 6-months relief package

State-run oil marketing companies have announced an increase in ethanol procurement price for a six months period ending November 30 to provide relief to ethanol manufacturers who are facing high input cost, primarily on account of fuel and electricity. 

Oil marketing companies– Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), and Indian Oil Corporation Ltd (IOCL)-- procure ethanol to blend with fuel before selling it. India achieved its target of an average of 10% blending across the country five months in advance earlier this month and now the government and industry are hopeful of expediting the more ambitious target of increasing the ethanol blending to 20% by 2025-26.

Three senior officials from the oil marketing companies confirmed that the companies have announced a ‘Six-months Relief Scheme’ to support ethanol manufacturers. 

There is no change in the basic price of ethanol from the different feedstock and the vendors have to maintain the prevailing rates in the invoices. To avail the relief, the vendors will have to raise a separate invoice for the relief amount at the end of every quarter. 

“Due to the exorbitant increase in the coal prices, the pricing committee of the OMCs approved the relief scheme to ethanol producers. The same has been conveyed to our locations, the Sugar Mills association and the All India Distilleries association,” an official from one of the OMCs said. 

Another official said that the relief was previously being given to vendors in states with deficits to support the ethanol industry. 

Moneycontrol has seen the notification, which states that the relief package is applicable for all supplies of ethanol invoiced to OMCs between June 1, 2022, and November 30, 2022. The OMCs will pay the relief amount to vendors after completion of each quarter, and the applicable GST of 5% will be applicable on the relief amount.

The relief amount will be based on the feedstock such as a relief of Rs 1606/kl from sugarcane juice/sugar/sugar syrup based ethanol, Rs 1493/kL for B-heavy molasses based ethanol, Rs 1179/kL for C-heavy molasses based ethanol, Rs 2337/kL for damaged food grain based ethanol, and Rs 1437 on surplus rice based ethanol. 

“With this relief scheme, we expect all vendors to maximize ethanol supplies and partner with us in achieving the ethanol blending targets,” the OMCs said in their notification. 

Union minister for petroleum and natural gas Hardeep Singh Puri said on June 6 that some petrol pumps in the country may be able to sell 20% ethanol blended petrol ahead of the April 2023 target.

India’s ethanol blending percentage stood at 2.33% in 2014. With the steps taken by the government in the last eight years, the availability of ethanol for blending is expected to go up to 450 crore litres in the current Ethanol Supply Year (ESY) from 67 crore litres in 2014.