The June 30 deadline for blending petrol with ethanol for oil marketing companies (OMCs) seems like a tall order right now. Contracts for supplying only 1,100 kilo litres have been finalised yet, when the annual requirement is 10,500 kilo litres. And while domestic companies can supply only 5,500 kilo litres of ethanol in the first year, the rest will have to be imported at almost double the domestic price. However, price notwithstanding, no global contracts have been finalised so far.
Ironically, the sugar industry is eager to supply ethanol and in the required quantity. But inflexible contracts and bad timing of procurement means it would not be able to provide more than 5,500 kilo litres in the first year.
The reasons: while the peak sugarcane crushing season is between November to mid-April, a part of the the supply to the OMCs will have to be made in off-season time. Moreover, sugar companies have already committed part of their supplies to the domestic alcohol industry and exports. The sugar industry follows the October-September yearly cycle. Also, since the contracts entered into with the OMCs are for a fixed supply on a monthly basis, there is no scope for increasing supplies during the peak season.
As Abhinash Verma, director general of the Indian Sugar Mills Association (ISMA), explains, ?The domestic supply shortage is a result of the timing of the procurement and inflexibility in the contracts. If sufficient notice was given, we could have produced the required quantity of ethanol required by the OMCs.?
In order to comply with the norm, every one litre of petrol needs to be blended with 50 ml (5%) of ethanol, which means 10,500 kilo litres of ethanol is needed annually, given the level of petrol consumption in the country. While ethanol can be domestically purchased for R45-46 per litre, imported ethanol could cost anywhere between R75-92 per litre.
An oil ministry official told FE that OMCs, including Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL), have floated global tenders in the US and Brazil (major producers of ethanol) to import ethanol, but no contracts have been awarded yet.
Of the 5,500 kilo litres domestic suppliers are able to provide, orders to the tune of only 1,100 kilo litres have been finalised by the OMCs. The remaining are in various stages of negotiations regarding the prices, sources said.
An IOC official admitted to FE that it will be difficult to meet the June 30 deadline as the domestic production is not sufficient at this time and no global contracts have been awarded yet. ?The timing stinks,? he said.
The tenders were floated by OMCs on January 2 and sugar companies were asked to submit bids by January 28. The technical evaluation was completed in mid-February and the lowest bidders have been subsequently called for negotiations. Verma said at the current domestic prices of ethanol, OMCs can save up to R10-12 per litre on mixing of petrol with ethanol.
The sugar industry produces about 250 lites of ethanol a year, of which 110 litres is supplied to the alcohol industry, and the rest is used for exports or animal feed.
