Ethanol sourcing from sugar mills to be less this season

The National Policy on Biofuel (NPB) 2018 has provisioned for an indicative target of 20% ethanol blending in petrol by 2030. Sugar mills could face disappointment after Centre tweaked a crucial condition in the tender document of oil marketing companies (OMC) to procure ethanol from mills, aside of considering a lower-than-expected hike in the price at which the biofuel would be purchased, CNBC-Awaaz reported on December 18 citing people familiar with the development.

In a major change to the terms of the procurement tender, OMCs have been asked to give priority to cooperative sugar mills when it comes to sourcing ethanol, a decision that may lead to less government offtake of ethanol from the leading mills. This decision will be effective immediately, said the channel.

Shree Renuka Sugars, Bajaj Hindusthan, Balrampur Chini, Dhampur Sugar Mills and Dwarikesh Sugar are some of the leading ethanol producing sugar mills in India. Ethanol is a high-margin produce for sugar mills.

Earlier, the condition was to procure ethanol from sugar mills with whom oil marketing companies had a long-term purchase pact in place. IOC, HPCL, BPCL and MRPL had recently issued a joint tender for 2024-25 sugarcane season to procure 88 crore litre ethanol.

The other key development that the channel has learnt is that Centre is considering a lower-than-expected hike in the price at which ethanol is to be purchased from sugar mills. Sugar mills were seeking a hike of Rs 2-2.50 per Litre hike in ethanol prices, while it is learnt that Centre is considering a hike of only Rs 1-1.50 per Litre.

Centre has been running an Ethanol Blended Petrol (EBP) programme to reduce import dependency and to boost the agriculture sector. The National Policy on Biofuel (NPB) 2018 has provisioned for an indicative target of 20% ethanol blending in petrol by 2030.

Ethanol produced from different feed stocks such as sugarcane juice, molasses, damaged food grains, surplus rice procured from FCI is considered by OMCs for procurement.