GEMA requests petroleum minister to guarantee continued existence of grain ethanol facilities

In a letter to Union Petroleum and Natural Gas Minister Hardeep Singh Puri, the Grain Ethanol Manufacturers Association (GEMA) outlined the difficulties faced by grain ethanol facilities without Long Term Offtake Agreements (LTOAs) with oil marketing companies (OMCs). In order to help the industry and keep numerous factories from experiencing financial instability, the letter urges quick action.

GEMA notes in the letter that several facilities have only received 50–64% of the allocation in Q1 and Q2 for the Ethanol Supply Year (ESY) 2024–25. Our operations’ sustainability is threatened by this sharp decline in sales, which could result in us turning into nonperforming assets (NPAs).

The letter highlights that under the Government of India’s Ethanol Blended Petrol (EBP) Program, many of these plants were built with the help of government programs, such as loans and interest subventions, predicated on the idea that there will always be a need for ethanol. With LTOA guarantees to protect their financial stability, these plants were built to manufacture ethanol especially for gasoline blends.

The letter refers to a Department of Food and Public Distribution (DFPD) office paper dated May 2, 2022, which discussed the concept of a Tri-Partite Agreement and the guaranteed purchase of ethanol by OMCs.

According to GEMA, we are having difficulty fulfilling our financial commitments under the existing allocation structure. According to our environmental clearance (EC) under the B2 category, plants are only allowed to produce ethanol for the EBP. We are unable to produce any other goods to help defray our financial obligations, therefore the OMCs continue to be our only customers.

To guarantee that the ethanol they produce can be properly accommodated, the group encouraged the minister to raise the blending percentages. “Revise the allocation preferences, as the sugar industry, which lacks LTOAs, is currently given priority, leaving grain ethanol producers at a disadvantage. Additionally, the ethanol producers who turn sugarcane into ethanol have the option of producing sugar, while grain-based ethanol industries like us are left with the only option of producing ethanol to meet the requirement of the EBP,” stated GEMA.

For ESY 2024-25-Cycle 1, OMCs have allotted around 837 crore liters of ethanol in comparison to the 970 crore liters of bids that producers nationwide submitted. For the ESY 2024–2025 supply of 916 crore liters of ethanol, OMCs have issued a call for bids.