India to fulfil all ethanol demand locally for petrol blending

20 June 2013 08:21  [Source: ICIS news]

KOLKATA (ICIS)--India will source the entire requirement of 1.05bn litres of ethanol domestically for petrol blending as offers from foreign suppliers were not acceptable by the government, an official in Ministry of Petroleum and Natural Gas said on Thursday.

The Indian sugar industry, which previously committed to supply 50% of the ethanol required for the mandatory 5% blending of petrol, has assured the government that sugar mills producing ethanol would be able to meet the entire requirement, the official said.

However, the sugar industry would only be able to meet the large supply commitment from the next sugar harvesting and producing season which falls in October 2013-September 2014.

As a result, the government may have to push back the deadline of 30 June for completing ethanol blending of petrol across the country, the official added.

According to the official, foreign ethanol suppliers quoted offers at Indian rupees (Rs) 70-90/litre ($1.20-1.50/litre) against tenders which remained open up to May 2013.

However, such offers were not acceptable as this would mean that petrol retail price would have to be increased by Rs4/litre, the official said.

Considering the volatility in global oil prices and weakening of the Indian rupee which would lead to hikes in domestic petrol retail price, the government was not willing to increase the burden of petrol retail price owing to impact of high imported ethanol prices.

“The local sugar industry is comfortably placed to supply the balance ethanol requirement over and above 550m litres committed from November [2013] onwards, if the government floats fresh tenders for domestic producers,” Avinash Verma, director general, Indian Sugar Mills Association (ISMA) said.

Oil marketing companies (OMCs) under the Ministry of Petroleum had floated tenders for procuring 110m litres of ethanol from domestic producers and the tenders which closed in May has been extended to July to allow more producers to submit their offers.

If the additional 550m litres of ethanol, which was earlier planned to be imported, is now to be sourced domestically, fresh tenders would have to be floated and the process and procurement would not be possible to be completed by 30 June, the official in Ministry of Petroleum said.

However, an official in Ethanol Manufacturers Association of India (EMAI) said that supplying higher volumes of ethanol to OMCs would be viable for sugar mills only if the government acceded to the demand that procurement price be linked to international prices.

The domestic offers of ethanol against the latest tender averaged around Rs46/litre delivered at depots of OMCs, and EMAI has represented to the government that with international offers substantially higher, OMCs have sufficient headroom to accept higher offers for domestic ethanol.

($1 = Rs58.72)

Author: Ajoy K Das

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