Govt said to have hiked ethanol rates fearing fall in blending as distilleries close operation

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In order to ensure 12 per cent blending target is achieved this year after the Food Corporation of India (FCI) halted rice supply for ethanol production , the government is believed to have raised prices of ethanol made from rice and maize to help distilleries restart production. However, top officials refused to comment saying notification is yet to be released.

According to trade sources, purchase price of ethanol by oil marketing companies (OMCs) has been increased by ₹4.75/litre to ₹60.29/litre when the biofuel is made from damaged/broken rice (purchased from open market) for remaining part of current ethanol year (until Oct 31, 2023). Also the new rate of ethanol will be ₹62.36/litre when it is to be produced from maize, an increase of ₹6.01/litre.

Both the new rates will be effective from August 7, the sources said. However, a top official of the government, while not denying the approval of the price hike said that notification is yet to be published. Some other officials also did not deny the hike in prices.

Until June 23, the OMCs have achieved 11.77 per cent blending since ethanol season started from December 2022. The government has shortened the current ethanol season to 11 months as from 2023-24 season, it has been changed to run from November to October.

Many distilleries stopped operation in July after FCI stopped issuing rice and if they do not operate during August-October, there is a chance of fall in blending rate from current level, industry earlier informed the government demanding the mid-season price revision.

Diversion of sugar

Food Secretary Sanjeev Chopra, on August 4, said that an inter ministerial group has been constituted to recommend revised ethanol prices for next season in view of expected higher availability of sugarcane that may increase diversion towards ethanol. But he did not rule out the possibility of recommending revision (hike) in prices of ethanol, produced from some feed stocks, for current season itself. The committee is likely to submit its recommendations in a month as the new ethanol season will start from November 1.

The Food Ministry expects about 5.5 million tonnes (mt) in terms of sugar may be diverted towards ethanol against about 4 mt this season. The sugar industry is more conservative and has pegged the diversion at 4.5 mt. Actually, sugar is not diverted to produce ethanol, which is made out of molasses (by-product of sugar) or sugarcane juice/syrup. The diversion estimate is based on how much quantity of sugar could have been produced from the same quantity of sugarcane that gets diverted towards ethanol.

From mid-July, FCI has stopped ₹20/kg rice supplied to produce ethanol, which is attributed to the political controversy created due its withdrawal of an approval within 24 hours with regard to supply of rice to Karnataka for human consumption at ₹31/kg, citing insufficient availability in central pool.