The sugar industry wants the government to put ethanol pricing formula in the public domain as the transparent formula would create confidence among stakeholders and help sugar mills to meet the ethanol target. Banks are not keen to assist mills going for ethanol production as they are unsure if ethanol prices will keep rising in the future and how the prices will be calculated.
In December 2014, the Union government decided in favour of a fixed pricing system for ethanol and followed it up with several incentives to increase ethanol production capacities. In the last two years, the sugar industry has achieved 5 per cent ethanol blending on an average across the country.
Outgoing President of Indian Sugar Mill Association (ISMA) Vivek Pittie, during the recent AGM, raised this issue saying, “The bankers, investors, suppliers, etc will get more confidence in the programme once they see the transparent ethanol pricing formula which the government uses to fix ethanol price every year”.
Concrete formula needed
Recently, the Cabinet Committee on Economic Affairs (CCEA) raised the price of ethanol extracted from sugarcane juice to ₹62.65 per litre from ₹59.48 for the supply year beginning December 2020. Unlike earlier formula (before 2014) — where there was only one rate of ethanol — the government has fixed different price for different sources of ethanol. Industry players say that a concrete formula on how ethanol price is calculated in the public domain will bring more clarity to banks and investors. According to the sugar industry, the banking sector is not giving priority to sanction loans to mills to enhance infrastructure to produce ethanol. Mill owners say that along with ethanol pricing, market and policies are some major concerns that the government needs to address.
Earlier, the government had fixed a target of 10 per cent blending of fuel-grade ethanol with petrol by 2022 and 20 per cent blending by 2030. However, the government is now planning to advance the achievement of 20 per cent blending target.
During the current season 2019-20 (Dec-Nov), the ethanol supplied as on November 9, 2020 is reported to be at 160.23 crore litres, which is equivalent to a blend of 5 per cent. For the year 2020-21, Oil Marketing Companies (OMCs) have allocated about 262.27 crore litres against offers received for about 322.57 crore litres of ethanol from sugar mills.
However, the total requirement as per tender floated by OMCs is about 457.64 crore litres. This could mean a blend of about 7-8 per cent, depending on the total fuel demand.
Encouraging blending
The government has admitted that as the existing ethanol distillation capacity in the country is not sufficient to produce ethanol to achieve blending targets, it is encouraging sugar mills, distilleries and entrepreneurs to set up new distilleries and to expand their existing distillation capacities.
Government is extending financial assistance by way of interest subvention for five years at 6 per cent maximum rate of interest against the loans availed by sugar mills/distilleries from banks for setting up ethanol projects.
One of the directors of a sugar mill in Sangli said that the government must fix the ethanol target only after consultations with sugar mills. “There are lots of unsolved issues on the ground. The government needs to address the concerns of mills,” he said requesting anonymity.
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