In a bid to make it more attractive for sugar millers to tender ethanol for the petrol blending programme, the Government has revised the formula for fixing the benchmark price. As a result, the net realisations from ethanol for sugar millers could increase by a tenth from the next sugar season starting October.

The move assumes significance as the Government is contemplating a major push to the ethanol blending programme by increasing mandatory blending from the current 5 per cent to 10 per cent in the years ahead. Increase in realisations would lure the sugar mills to offer more ethanol to the oil marketing companies to meet the blending requirement.

An inter-ministerial group, consisting of officials from the Ministry of Petroleum and Natural Gas, Food and Public Distribution among others, has recently agreed to tweak the formula to fix the benchmark price. The proposed formula would be based on the average of the refinery transfer price (RTP) or cost of petrol to the oil marketing companies for the previous financial year instead of the lowest RTP.

Currently, the benchmark price for ethanol — which stands at ₹44 a litre, is derived from the lowest RTP. At this price, the ex-mill realisations for the factories work out to around ₹38 a litre, while the same for rectified spirit or extra neutral alcohol are marginally higher at ₹40-41 a litre.

Petroleum officials said the realisations could go up by ₹1-2 litre, while the sugar industry expects an increase of upto ₹5 a litre from the next tender. The sugar companies have been demanding that benchmark price be fixed taking the average of the RTP for the previous financial year instead of the lowest RTP. The OMCs have so far finalised offers for 65 crore litres of ethanol and so far for the current sugar season and about 35 crore litres has been lifted by them.

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