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OMCs float fresh tender for procuring 910 million litres of ethanol

Business Standard:  March 15, 2019

Lucknow: In the backdrop of the Cabinet Committee on Economic Affairs (CCEA) approving Rs 2,790-crore interest subvention for bank loans worth Rs 12,900 crore to sugar mills aimed at facilitating additional distillery capacities, the public sector oil marketing companies (OMCs) have floated a fresh tender for procurement of 910 million litres (ML) of ethanol.

In sugar season 2018 (October-September), the OMCs requirement of ethanol for blending with petrol stood at 3,136 ML and for the current 2019 season. The same had been estimated at 3,300 ML.

So far, ethanol blending with petrol has reached 5.8 per cent. States like Maharashtra, Uttar Pradesh (UP), Uttarakhand, Punjab-Haryana, and Karnataka have clocked more than 8.5 per cent blending with Maharashtra and UP having achieved 9 per cent or even higher blending owing to high availability of sugarcane.

“Considering the current ethanol capacity of 3.8 billion litres, we will cross 10 per cent blending with petrol in the next year itself. The year thereafter could see us substituting even 15 per cent of the country’s petrol consumption,” said Abinash Verma, director general, Indian Sugar Mills Association. Earlier, the OMCs had floated tender of 3,300 ML, comprising 660 ML for ethanol manufactured from B-heavy molasses/sugarcane juice/damaged foodgrains and 2,630 ML from C-heavy molasses.

Later, the OMCs finalised tender to lift more than 2,593 ML, of which 301 ML has been supplied so far.

Now, a second tender for 910 ML of ethanol has been floated tagged with March 22 as the last date of submitting bids. This is indicative of the OMCs incorporating the larger vision of the Centre to increase ethanol blending in fossil fuels to cut oil import bill.

Indian Oil Corporation is the top buyer of ethanol, with 46.6 per cent share, followed by Hindustan Petroleum, and Bharat Petroleum. In this sugar season, 5.8 per cent of ethanol blending has already been achieved, while 90 per cent of ethanol is being produced from C-heavy (70 per cent) and B-heavy (20 per cent).

The fresh ethanol capacity is expected to help beleaguered domestic sugar sector tide over the challenges of market glut, falling sugar prices, and piling inventories by diverting a part of sugarcane towards ethanol production.

Meanwhile, the CCEA had also approved Rs 565 crore towards interest subvention for extending indicative loan of Rs 2,600 crore by banks to molasses-based standalone distilleries. These loans were in addition to the Rs 4,440-crore bank loans approved in June 2018, which comprised interest subvention of nearly Rs 1,300 crore.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.