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OMCs, sugar companies indulge in blame game on ethanol blending

Jun 30 2014, 00:48 IST
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The government’s last deadline of June 30, 2013, for the strict implementation of 5% blending has expired. The government’s last deadline of June 30, 2013, for the strict implementation of 5% blending has expired.
SummaryLarge-scale use of ethanol as a minor additive to petrol is prevalent in 20 countries.

offered by producers under the two tenders and the EoI, OMCs finalised orders for roughly 68-crore litres and rejected the rest. Mills also complain that the OMCs shouldn’t reject supply offer and until the price of ethanol exceeds that of petrol’s cost of production. They added that the sugar industry could supply adequate ethanol for implementing the blending programme. OMCs require roughly 105-crore litres of ethanol a year for implementing the 5% blending programme.

There are other issues involved in ethanol supplies as well. Producers say they are eligible for payment three weeks after supplying ethanol to the OMCs but sometimes the payment is delayed. In contrast, other bulk consumers, including makers of rectified spirit and potable alcohol, offer advance payment to the liquidity-starved sugar mills for ethanol supplies, improving their cash flow.

Moreover, since cane crushing is a seasonal activity and, therefore, the bulk of ethanol production is restricted to November-April. This makes swift floating and finalisation of tenders by OMCs, factoring in the cyclicality of production, crucial.

Since sugar mills are already stressed due to exorbitant cane prices, they can’t afford to build ethanol inventories for a long time and incur costs while waiting for the finalisation of tenders by OMCs.

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