The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved a new mechanism for revision of ethanol prices for supply to public sector oil marketing companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) programme.
Through the new method, the prices of ethanol for blending will be cut to Rs.39 per litre from December 1, from the current level of Rs 48.5-49.5 per litre.
Lesser supplies
This, coupled with the government’s recent decision to remove the excise duty exemption for ethanol, could lower ethanol supplies to the OMCs.
“The prices of ethanol will be reviewed and suitably revised by the government at any time during the ethanol supply period, that is, from December 1, 2016 to November 30, 2017, depending upon the prevailing economic situation and other relevant factors,” according to a statement from the government.
“It is good for the OMCs but bad for the sugar mills,” K. Ravichandran, Senior Vice President and Co-Head, Corporate Sector Rating, ICRA, said.
Higher realisations
“The lower price could lead to supply issues again. Sugar mills will begin to divert their supply to other sectors such as Indian Made Foreign Liquor that also use ethanol and will provide higher realisations.” This step comes after several government moves to boost the supply of ethanol in the first place.
“A few years ago, the supply of ethanol from the sugar mills was an issue,” K. Ravichandran, Senior Vice President and Co-Head, Corporate Sector Rating, ICRA said. “Then the government gave ethanol excise duty exemption and also mandated that OMCs blend five per cent of ethanol with petrol. This improved the supply situation.”
Ethanol supplies increased to 67.4 crore litres in 2014-15 and the projected supplies for ethanol in 2015-16 are about 120 crore litres, the statement added.
