India cuts ethanol prices for petrol blending by 21%

The Indian government’s economic committee has today approved a mechanism to lower the price of ethanol sold to its ethanol blending programme to 39 rupees (€0.53) per little.

The Cabinet Committee on Economic Affairs (CCEA) has approved a mechanism for revising ethanol prices to enable public sector oil marketing companies (OMCs) carry out the Ethanol Blended Petrol (EBP) programme.

From 1 December, 2016, to 30 November, 2017, the administered price of ethanol for the EBP programme will be 39 Indian rupees per litre, down 21% from the current Rs 48.5-49.5 range.

Charges will also be paid to ethanol suppliers as per actuals in case of excise duty and VAT/GST and transportation charges as decided by OMCs.

The mechanism also factors for possible hikes or slumps in petrol retail prices, which will be reflected accordingly in the requirement of maintaining the fixed cost of purchase of ethanol during the ethanol supply year. 

“The revision in ethanol prices will facilitate the continued policy of the government in providing price stability and remunerative prices for ethanol suppliers,” the CCEA, headed by Prime Minister Shri Narendra Modi, said in a statement.

The CCEA intends to review and “suitably revise” ethanol prices at any time during the supply year based on the current economic situation and other relevant factors.

Price reaction

The EBP programme was launched in 2003 to promote the use of alternative and environmentally friendly fuels and to reduce dependency on foreign fuel imports.

However, since 2006, OMCs were not able to receive offers for the required quantity of ethanol against the tenders floated by them due to various constraints in supply and pricing.

In order to augment the supply of ethanol, the government in 2014 decided fixed the delivery price of ethanol to the OMC depots in the range of Rs 48.50 to 49.50 per litre, including central/state government taxes and transportation charges. 

Ethanol supplies increased to 674 million litres in 2014-15 and the projected supplies for 2015-16 are around 1.2 billion litres.

However, with the rising of sugar and falling crude prices and consequent under-recoveries of OMCs the government decided to re-examine ethanol pricing under the EBP programme. 

This article was written by Ilari Kauppila, deputy editor at Biofuels International