India faces over 53% shortfall in domestic ethanol procurement

30 October 2013 07:16  [Source: ICIS news]

By Ajoy K Das

sugarcane cropKOLKATA (ICIS)--India’s government has received offers of 620m litres of ethanol during December 2013-November 2014 against its 1.33bn litres procurement target, marking a 53.4% shortfall that will delay its gasoline blending programme by a year, an official said on Wednesday.

The average price offered by Indian government-owned oil marketing companies, which were leading the ethanol procurement drive, was about Indian rupees (Rs) 38/litre ($0.62/litre), whereas sugar mills were seeking prices of about Rs50/litre, the official in India’s ministry of petroleum and natural gas said.

The sugar industry has conveyed that they will be able to increase the volume of ethanol offerings against tenders floated by the oil marketing companies if prices were to be revised upwards.

However, the ministry was not inclined to hike prices because it would make ethanol blending in petrol programme unviable, the official explained.

According to an official with Indian Sugar Mills Association (ISMA), rectified spirit and ultra-neutral alcohol, both derivatives of molasses as ethanol, were being sold in the market at Rs40/litre and Rs48/litre respectively.

There was no reason for the sugar mills to sell ethanol at a lower price offered by the state-owned oil marketing companies, the official said.

In February this year, oil marketing companies tendered for procuring 550m litres of ethanol but were able to place orders for only 400m litres while offers for 150m litres were rejected since the mills had sought a price of Rs60/litre, the ministry official said.

He said the shortfall could not be overcome through imports either because of high international prices ranging between Rs72/litre and Rs90/litre that were quoted in response to a global tender floated in June.

The shortfall in domestic availability of ethanol would further delay implementing the countrywide mandatory 5% blending of ethanol with petrol.

The blending programme, which was to have been completed by June 2013, would not be implemented across the country before another 12 to 13 months, the official added.

ISMA, meanwhile, has urged the government to permit sugar plants to produce ethanol directly from the sugarcane instead from molasses, a by-product of sugar production, as this would ensure higher availability while ensuring remunerative price to sugar mills.

However, the official in the petroleum ministry said this had been rejected by the agriculture ministry as it fears large-scale diversion of sugarcane for ethanol production would lead to shortage of raw material for sugar production.

($1 = Rs61.47)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

Author: Ajoy K Das

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