Government approves pricing formula for Bio-ethanol procurement 

Approval of the pricing formula for procurement of bioethanol suggested by the Expert Committee, coupled with a floor price and a ceiling price 

The Cabinet Committee on Economic Affairs has approved the issue of pricing for bio-ethanol procurement by Oil Marketing Companies (OMCs) for Ethanol Blended Petrol (EBP) Programme as per following:

i. The 5% mandatory ethanol blending with petrol as already decided by the CCEA in the past, should be implemented across the country, for which the Ministry of Petroleum & Natural Gas will immediately issue a gazette notification, for the OMCs to implement from the 2012-13 sugar season, effective from 1st December, 2012.

ii. Procurement price of ethanol will be decided henceforth between OMCs and suppliers of ethanol.

iii. In case of any shortfall in domestic supply, the OMCs and Chemical companies are free to import ethanol.

It is expected that 5% bio-ethanol will be blended with petrol sold in all the States and UTs of the country.

The EBP Programme is presently being implemented in a total of 13 States with blending level of about 2% against a mandatory target of 5%.

A stable EBP programme would ensure sustainable benefits for the sugarcane farmers across the nation. It will ensure an alternative market for the farmers who frequently get adversely affected in case of bumper crop of sugarcane and lack of its demand in the market. It will also provide an incentive to small and medium farmers to increase efforts towards sugarcane crop as better returns would be ensured.

Procurement of ethanol at a price determined by the market will ensure stability. EBP programme not only provides opportunities to sugarcane farmers, but it also ensures the use of ethanol as bio-fuel in a big way which is environment friendly. Besides, to the extent of implementation, this reduces the dependence on imported crude and leads the nation ahead on fuel self sufficiency.

Background:

The CCEA in its meeting held on 16th August 2010 had approved the ad-hoc price of Rs. 27.00 per litre for bio-ethanol for procurement by OMCs. This price was subject to adjustment on the basis of recommendation of an expert committee for pricing of ethanol. Later an Expert Committee headed by Dr. Saumitra Chaudhury, Member, Planning Commission, considered the issue of pricing of ethanol. In its report, submitted in March 2011, the expert committee recommended a formula which was derived broadly from the price of motor spirit. Subsequently, a report by the Economic Advisory Council to the Prime Minister, submitted on 10.03.2011, recommended the fixation of price of bio-ethanol through the market mechanism. The issue of procurement price for bio-ethanol has been considered by a Group of Ministers and the CCEA.