Sugar mills aren't keen on selling ethanol to petroleum marketing companies this year because the byproduct fetches more money if sold to the alcohol industry.

The union government launched the ethanol-blending programme last year to cut down automobile pollution and to promote greener means of transport. Oil companies have floated tenders for purchasing over one billion litre this year while ethanol manufacturers have bid for only 60% of the quantity.

Oil companies purchased ethanol at Rs 27/litre from ethanol manufacturing units attached to sugar mills last year while alcohol prices were at about Rs 20/litre. Selling ethanol to oil companies made business sense for sugar mills last year because sugar prices barely matched the cost of production throughout the year due to a glut in production.

As another sugar season approaches in about a month, the equations have changed. While oil companies have not said a word about the price they are going to pay, prices of rectified spirit have risen to Rs 35-36/litre. Extra neutral spirit is being sold for Rs 38/40/ litre and special denatured spirit currently costs Rs 29/30/litre.

According to National Ethanol Manufacturers' Association, ethanol manufacturers have bid for only 60.52 lakh litre quantity as against 1.01 billion litres that oil companies intend to purchase.

Ninetyfive manufacturers have bid for tenders floated by oil companies of which 50 bids are from Maharasthra, the top ethanol producer. Nine sugar co-operative societies and two private distilleries from Gujarat have submitted the tenders.

Sugar mills have demanded an upward revision in ethanol prices. Vijaysinha Mohite Patil, president, National Ethanol Manufacturers Association, has demanded a price of Rs 35/litre for ethanol. "Selling ethanol at Rs 27/litre is naturally not affordable now," said RG Mane, secretary of National Ethanol Manufacturers' Association.

"Farmers will benefit with the increase in prices," said Mansinh Patel, chairman, Gujarat State Co-operative Sugar Factories. He added that ethanol prices was Rs 21 a litre in 2010-11.

Distilleries in Gujarat have a combined manufacturing capacity of 3.5 lakh litres per day with over 30% to be supplied to oil marketing companies for blending ethanol with fuel.

Oil companies had floated tenders for purchasing 1.05 billion litre of ethanol last year. They issued purchase orders for 56.68 crore litre but indent was given only for 34.78 crore litre due to difficulties in getting permission of excise authorities in some states.

source: ET

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