Mechanism for procurement of ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol programme
No: ----- Dated: Dec, 10 2014
| Mechanism for procurement of ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol programme |
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The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Shri Narendra Modi, has approved a mechanism for procurement of Ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Program.
The CCEA approved replacing the current procedure on ethanol with the following:
(i) The delivered price of Ethanol may be fixed in the range of Rs.48.50 per litre to Rs.49.50 per litre, depending upon the distance of sugar mill from the depot/installation of the OMCs as per the slab given below:
(ii) The rates proposed would be delivered price at depot location and inclusive of all Central and State taxes, transportation costs, etc which would be borne by the Ethanol suppliers.
(iii) The OMCs will incorporate "Supply or Pay" clause duly backed up with bank guarantee in their supply agreement with Ethanol suppliers.
(iv) OMCs will sign MOU with the State Governments for a comprehensive system for uninterrupted inter-depot transfer of Ethanol within a State. This may include annual excise permits to OMCs for movement of Ethanol and other relevant measures EBP Programme was launched in 2003, which was extended to the entire country except NE States, J&K, A&N Islands and Eakshdweep, w.e.f, 1.11.2006. OMCs were directed to sell 5% ethanol blended petrol subject to commercial viability. A National Policy on Bio-fuels was also notified by the Government in 2009 with the objective to ensure that minimum level of bio-fuels is readily available to meet the demand at any given time.
There are certain advantages of blending Ethanol with Petrol:-
i. Incentivizing the sugar industry and benefiting sugar-cane growers. ii. EBP has higher octane number than petrol resulting in reduced emissions of pollutants. iii. It is a renewable fuel. iv. At 5% blending level, OMCs will have surplus Petrol production of 115 crore litres which can be exported to earn foreign exchange. (USD 766 million annually).
In order to give fillip to the EBP program, the Government, inter alia, decided in November 2012 that 5% Ethanol blending with Petrol should be implemented across the country; procurement price of Ethanol will be decided between OMCs and the suppliers of Ethanol.
However, there are some constraints in implementing the EBP program:
(i) OMCs are not getting enough quantity of ethanol. Offers were received for only 45% of the total requirement of ethanol in 2013.
(ii) Transportation of Ethanol from sugar mills to OMC depot and its inter-depot transfer is regulated by the State Excise departments. The procedure adopted by States (particularly for inter-state supplies) in issuance of licenses and Import/ Export NOCs is complicated, time consuming and acts as an impediment.
(iii) OMCs purchase ethanol at benchmark price which is based on average RTP of Petrol for the previous financial year. The price of EBP at times can become unviable if prices of petrol come down. At the same time, in certain cases, prices being quoted by Sugar mills are higher than benchmark price, resulting in actual procurement being less than the offered quantity. This creates uncertainty.
The present mechanism of procurement of Ethanol based on a benchmark price decided by OMCs may be replaced by a new mechanism of uniform price of Ethanol declared for each sugar year. M/o Consumer Affairs, Food & Public Distribution has stated that the ex-sugar mill price of Ethanol is around Rs.42.02 per litre. Besides, suppliers are required to incur additional cost of around Rs.6-8 per litre depending on the applicable state VAT, distance of sugar mill/distillery from OMCs' depot and the Excise duty. Thus, for Ethanol suppliers, the landed cost of Ethanol at the OMCs depots would be around Rs.49 per litre. |