The Hindu Business Line : Meet on pricing of ethanol next week

Key issues
Discussions precursor to negotiations with the OMCs.
Against any formula linking price with global landed rate of petrol.
Actual production costs or comparable energy value preferred.

New Delhi , June 10

The Indian Sugar Mills Association (ISMA) and the National Federation of Cooperative Sugar Factories Ltd (NFCSF) are meeting late next week to work out a joint strategy for supply and pricing of ethanol to the national oil marketing companies (OMC).

The meeting will be a precursor to negotiations with the OMCs over the base price at which ethanol will be supplied, along with an annual cost escalation factor linked to cane prices paid by mills.

Till now, mills have been offering ethanol at Rs 18.75 a litre.

Crucial issue

This, they say, is low in relation to not only what is realised on rectified spirit and potable alcohol, but also the "bare" ex-refinery price of petrol, net of excise and other levies.

The latter, after incorporating the latest revision, works out to Rs 23.39 a litre in Delhi, against a retail price of Rs 47.51 a litre.

"Pricing is the crucial issue. Once they (mills) come with their common price, we shall take a call. But we are against any formula linking ethanol price with global landed price of petrol. Instead, we would prefer it to be based on actual production costs or comparable energy value," an OMC representative told Business Line.

The Government has mandated the OMCs to sell 5 per cent ethanol-blended petrol in all States (barring the North-East) from October 1.

The OMCs have estimated their total annual ethanol requirement at five per cent blending at 56.785 crore litres, including 22.819 crore litres for Indian Oil, 18.779 crore litres for Bharat Petroleum and 15.187 crore litres for Hindustan Petroleum.

Demand

As per State-wise ethanol demand projected by the OMCs, Maharashtra would account for 7.981 crore litres, followed by Tamil Nadu (5.843 crore), Uttar Pradesh (5.190 crore), Delhi (4.603 crore), Andhra Pradesh (4.148 crore), Gujarat (4.035 crore), Kerala (3.837 crore), Karnataka (3.810 crore), Haryana (3.003 crore), Punjab (2.985 crore), Rajasthan (2.580 crore), Madhya Pradesh (2.232 crore), West Bengal (1.630 crore) and Orissa (1.097 crore).

On the supply side, the mills say that they have already installed an aggregate ethanol production capacity of around 130 crore litres, which can even meet 10 per cent blending requirement.

Of this, the installed capacity in Maharashtra is 54 crore litres, 39 crore litres in Uttar Pradesh, nine crore litres each in Andhra Pradesh, Tamil Nadu and Karnataka, six crore litres in Gujarat and 4.5 crore litres in Bihar.

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