Ethanol purchase price by oil marketing companies (OMCs) for the green fuel produced from damaged foodgrains is set to turn costlier by ₹2-3/litre as the government is believed to have agreed to such a hike following an increase in raw material costs.

Currently, the OMCs buy the ethanol produced out of damaged grains (rice) or maize at₹52.92/litre and producers have sought an increase in purchase price citing non-availability of grains.

The decision to increase prices, however, will not derail the government’s ethanol blending programme, sources said.

FCI reserve stock

The committee of secretaries headed by the Cabinet Secretary last week agreed to an in-principle hike and asked OMCs to decide as it is their commercial decision, sources said. However, it was also stressed that the target of increasing the blending rate should be kept in mind for which uninterrupted production of ethanol was required, the sources said.

To address the issue of non-availability of grains, the Food Ministry was earlier believed to have asked these producers to lift the rice supplied from reserve stock of the Food Corporation of India (FCI) kept for ethanol production. But, it did not find acceptance among them, sources said.

All-India average mandi price of maize was ₹1,445/quintal during ethanol supply year 2020-21, which runs from December to November, whereas it has increased to ₹1,736/quintal until April in current ESY, a rise of 20 per cent. The prices of damaged foodgrains or broken rice vary from State to State and largely depend on sourcing, industry sources said.

OMCs’ ethanol buy

Unlike grain-based ethanol, the cabinet approves ethanol purchase prices of OMCs when the fuel is produced by sugar mills. During ESY 2020-21, OMCs had purchased 302.30 crore litre of ethanol for blending from both sugar mills and grain-based plants, resulting in the blending rate increasing to 8.10 per cent from 5 per cent in 2019-20.

Country’s ethanol production capacities are required to be enhanced to about 1,700 crore litre to achieve 20 per cent blending target by 2025.The capacity of molasses-based distilleries are currently at 569 crore litre and that of grain-based distilleries 280 crore litre, totalling 849 crore litre.

To achieve the blending target, the government has been raising ethanol prices feedstock-wise almost every year. For the ongoing ESY, the ethanol rate is ₹46.66/litre if made out of C-heavy molasses, ₹59.08/litre for B heavy molasses and ₹63.45/litre from sugarcane juice/sugar/sugar syrup route. However, the rate for ethanol from FCI’s earmarked rice was kept unchanged at ₹56.87/litre since the government maintained the issue price of the grain at ₹20/kg.

“The government has to ensure that OMCs get the ethanol for which continuity of production is necessary. After wheat and maize prices increased, the rate of broken rice has also increased, though it was not that high. Since the difference between ethanol made out of FCI rice and maize is about ₹4/litre, an increase of ₹2/litre in fuel made from maize looks economical for OMCs,” said an official requesting anonymity.

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