Oil marketing companies (OMC) have come to the rescue of sugar mills in Bihar, stepping in to buy ethanol, which was once bought by liquor manufacturers in the State.

Following the imposition of prohibition in the State, the sugar mills were stuck with bagasse and its processing plants. The Ministry of Petroleum & Natural Gas took advantage of this situation and asked the OMCs to procure it for their ethanol blended petrol programme.

According to State-wise data of procurement for the blending programme, Bihar has recorded an increase of over six-fold in volumes over the last fiscal. This surge coincides with the implementation of prohibition in Bihar, which has been in effect since April 2016.

Industry watchers BusinessLine spoke to pointed out that liquor manufacturers offered a premium of ₹4 to ₹5 a litre of ethanol over the government prescribed price for blending with fuel. This advantage was wiped out when the Nitish Kumar government implemented prohibition.

Thanks to prohibition, Bihar now meets over 96 per cent of its fuel-blending requirements locally. Comparably, Bihar met 65.5 per cent of its ethanol blending requirement from local production in 2015-16 and only 7.9 per cent of its requirement in financial year 2014-15.

According to data compiled by the Indian Sugar Manufacturers’ Association, the State required 66,234 litres of ethanol for fiscal 2016-17, 61,644 litres in fiscal 2015-16 and 48,400 litres in fiscal 2014-15.

Bihar’s performance is much better than larger sugarcane growing states such as Maharashtra and Karnataka. Maharashtra will meet 20.81 per cent of its blending requirement in the current fiscal from local procurement. The State met 72.32 per cent of its requirement in financial year 2015-16 and 57.43 per cent in fiscal 2014-2015.

Karnataka, on the other hand, will meet 30.72 per cent of its blending requirements in the current financial year from local procurement. In fiscal 2015-16, Karnataka met 47.59 per cent of this requirement from local procurement.

Missing target

But all is not rosy for ethanol blending in the country. India will miss the 10 per cent blending target set by the Ministry of Petroleum and Natural Gas forthe current financial year.

National supply data reveal that only 78 crore litres of ethanol have been committed for supply to OMCs in the current financial year. This is nearly 30 per cent lower than the 111 lakh litres of ethanol contracted for supply in fiscal 2015-2016.

The industry says that the sharp decline in ethanol supply is largely due to the withdrawal of the excise duty waiver. In June 2015, sugar mills were exempted from the 12.36 per cent excise duty on ethanol supplied to public sector OMCs.

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