Maharashtra ethanol mills seek better price from OMCs

Written by Nanda Kasabe | Pune, | Updated: Apr 23 2013, 05:45am hrs
Oil marketing companies (OMCs) have started issuing letters of intent (LoIs) for ethanol purchase to the lowest bidders at a base price of R34-36 a litre, around 30% higher than the R27 a litre until last year. However, a clear picture is yet to emerge in Maharashtra. Although a majority of mills in Uttar Pradesh, Karnakata and Tamil Nadu have got LoIs, those in Maharashtra quoted a higher price and are, therefore, still awaiting LoIs, Vijaysinh Mohite Patil, president, Ethanol Manufacturers Association of India, said.

Maharashtra mills had pressed OMCs to purchase ethanol from the state at rates of R40 per litre at a meeting held in Mumbai last week and had given the marketing companies eight days to think over the proposal, Patil said. The OMCs had decided to procure 110 crore litre of ethanol in November 2012, for which tenders were floated. The sugar industry offered 55 crore litre. The demand from Maharashtra was around 31.52 crore litre, of which 20 ethanol manufacturers had filled tenders for 4.76 crore litre.

Patil said that the tender rates quoted by Maharashtra mills were extremely satisfactory. Mills had quoted a basic price of R40 per litre, which comes to a delivered price of R47-48 per litre to the company and, after blending it with petrol, the price for consumers would be up to R76 per litre. Therefore, there was no question of OMCs making losses, he explained.

According to informed sources, the average price of ethanol (ex depot) works out to R38.53 a litre compared with R44.80 for petrol. Even after taking into account central and state levies, the price of the green fuel at petrol pumps works out to R 54.70 a litre as against petrols R67.29. As a consequence, the difference per litre stands at R12.59. Sources said that if the rates quoted by Maharashtra were taken into account, OMCs would still save around R6.5 per litre. In contrast, companies have quoted delivered prices between R69.50 per litre and R72.45 per litre, and there is a price difference of R32-38 per litre between domestic and global tenders and, therefore, the OMCs should agree to the tender prices quoted by domestic ethanol makers and issue purchase orders soon, Patil said. OMCs have floated global tenders for 52 crore litre of ethanol. Patil said ethanol makers in Maharashtra, Gujarat and Karnataka have made losses in the last couple of years.