India ethanol makers seek Rs40/litre minimum OMC procurement price

16 May 2013 09:02  [Source: ICIS news]

By Ajoy K Das

KOLKATA (ICIS)--Indian ethanol producers want the domestic oil marketing companies (OMC) to pay at least rupees (Rs) 40/litre ($0.73/litre) when procuring the blending ingredient that makes fuel environmentally friendly, an industry official said on Thursday.

Current OMC offers for procuring ethanol from the domestic market stand at Rs32/litre, which is less than half the import prices of the material, RG Mane, secretary of the Ethanol Manufacturers’ Association of India (EMAI), told ICIS.

At Rs32/litre, the ethanol procurement offer is not economically viable for domestic producers, when import offers received by OMCs were at  Rs72-90/litre.

“After adjusting for handling and transportation costs, the OMC offer price just about covered cost of production leaving domestic ethanol producers a margin of Rs1/ litre,” Mane said.

“We have been meeting OMCs two to three times a month seeking revision of prices for the next round of ethanol procurement but have not received any response till now,”  he added.

The OMCs have started the ethanol procurement process for 110m litres, representing 10% of the projected annual requirement under the government’s program to promote the use of ecologically friendly fuel, or green fuel.

By 30 June, the Indian government mandates that petrol should have a 5% ethanol blend – a program that will require 1.05bn litres of ethanol per annum.

Domestic production would account for more than half of the ethanol required at 550m litres.

Even with a higher domestic ethanol procurement price of around Rs40/litre, OMCs can still absorb spike in fuel prices in the international market and will have sufficient headroom for savings in petrol retailing with the average national petrol selling price at Rs70/litre.

If Indian authorities were to ignore an import-linked price procurement for domestic ethanol, producers may opt not to take part in the government’s program, industry sources said.

This scenario would mean the country will have to import more volumes, which are much more expensive, they said.

Processing costs in the western region are much higher compared with those in the northern parts of India. An upward adjustment in OMC’s procurement prices is particularly important for producers in the western region as they will supply more than half of the total domestic ethanol requirement.

($1 = Rs54.78)

Author: Ajoy K Das

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