Centre hikes ethanol prices to cut oil import bill

New Delhi: The government on Tuesday raised the price of sugarcane-extracted ethanol used for blending in petrol by up to Rs 1.84 per litre as it looked to cut oil import bill by $1 billion annually through its greater use in auto fuels.

State-owned oil marketing companies will buy ethanol from sugar mills, for mixing in petrol, at enhanced rates for ethanol year beginning December 1, Petroleum Minister Dharmendra Pradhan said here.

He was briefing reporters on the decisions taken by the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi.

The price of ethanol from 'C-heavy molasses' has been raised by 29 paise per litre to Rs 43.75 while the same from 'B-heavy molasses', also called as intermediary molasses, by Rs 1.84 to Rs 54.27 a litre.

Ethanol is a by-product of molasses generated on crushing of sugarcane and the higher price is to encourage sugar mills to divert from sugar production.

Cane-based ethanol can be produced three different ways — directly from cane juice, from B-grade and C-grade molasses. Pradhan said the higher price is expected to increase the procurement of ethanol to 260 crore litres between December 2019 and November 2020, up from 200 crore litres bought in the previous ethanol year.

"Increased ethanol blending in petrol is expected to replace 2 million tonnes of oil annually, helping save $1 billion in import bill," he said.

The percentage of ethanol being doped in petrol will rise from about 6 per cent now to 7 per cent next year and to 10 per cent by 2021-22, he said.

Price of ethanol was last revised in September last year when the CCEA had approved a 25 per cent hike in the price of ethanol produced directly from sugarcane juice to Rs 59.13.

Now it has been hiked to Rs 59.48. At that time, the price of ethanol produced from B-heavy molasses was hiked from Rs 47.13 to Rs 52.43 but that from C-heavy molasses marginally reduced to Rs 43.46 from Rs 43.7.

Commenting on the decision, Indian Sugar Mills Association (ISMA) director general Abinash Verma said: "Government's decision to increase ethanol price once again, with special emphasis and a higher increase for ethanol made from B-heavy molasses, confirms the government's commitment towards encouraging more diversion of the surplus sugarcane/sugar into ethanol."

"The second very important decision of allowing a single premium price for the ethanol made from partial or 100 per cent sugarcane juice is another big and positive step in this direction," he said.