Ethanol blending order sweetener for sugar cos

Profits remained subdued in the sugar sector due to tight government controls over sales and stocks of sugar while high cane prices pushed up arrears to farmers. This enhanced the industry's reliance on returns on the sale of by-products of molasses such as ethanol.

Last year, the Saumitra Chaudhuri panel had recommended linking the ethanol price with the rate of petrol at the depot, with a discount of 20%.

“When rectified spirits, produced from molasses, with 94.5% purity fetch Rs 34-36 a litre, producers were supposed to supply fuel ethanol with 99.5% purity at a provisional price of Rs 27 a litre. Moreover, producers were suffering huge losses as the volume also drops by around 5% if you process the rectified spirit further to produce fuel ethanol. But if OMCs (oil marketing companies) buy at market prices and the blending plan is implemented strictly, the sugar industry will benefit greatly, as ethanol producers would have fixed buyers each year,” said a senior industry executive.

The country's ethanol production rose 8% in 2011-12 from a year earlier to 283.8 crore litres while demand stood at 279.6 crore litres, of which the requirement by OMCs accounts for nearly 30%. Although mandatory ethanol blending was introduced in 2008, only 13 states have implemented the programme and the average blending is just 2%. If the mandatory blending programme is now strictly implemented, OMCs would require around 100 crore litres a year.

OMCs say that as long as ethanol is priced lower than petrol,

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