Ethanol blending faces supply hurdle

The petrol-ethanol blending programme faces an acute shortage due to a deficient sugarcane output and withdrawal of the excise duty exemption by the government.

To achieve the target 10 per cent blend, oil companies issued their first tender on October 22, 2016, for 2.8 billion litres of ethanol to be supplied between December 2016 and November 2017. In response, sugar mills offered and contracted for 780 million litres.

“Sugarcane output was 2025 per cent lower than last year, resulting in a proportionate decline in ethanol production. Lower crushing of cane doubled the price of molasses, the raw material for ethanol. Sugar mills prefer to sell molasses rather than ethanol after incurring a conversion cost of 15-16 per cent. The government also withdrew the excise duty exemption of ~4-5 a litre on ethanol,” said an industry executive.

Bharat Petroleum Corporation, on behalf of Hindustan Petroleum Corporation and Indian Oil Corporation and itself, issued a supplementary tender for procurement of 1.27 billion litres of ethanol. Industry sources said no sugar mill had shown interest to the second tender. The BPCL executive in charge of ethanol procurement could not be contacted.

“The supplementary tender was not needed. Had sugar mills been in a position to supply ethanol, they would have participated in the first tender,” said the industry executive.

Last year, sugar mills had contracted for 1.3 billion litres of ethanol, of which the actual lifting was 1.11 billion litres. Oil companies had sought 2.26 billion litres of ethanol from sugar mills.