Rising oil import bills, economic slowdown prompts CCEA to increase Ethanol procurement prices for Ethanol Blended Petrol

@prashanthamine

Mumbai: The decision of the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi in fixing higher ethanol price for ethanol derived from different raw materials for supply to Oil Marketing Companies (OMCs) for the Ethanol Blended Petrol (EBP) programme for forthcoming 2019-20 sugar season and for ethanol supply year from December 1, 2019 to November 30, 2020. It means good news for sugarcane farmers in nine major sugarcane producing states of Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Gujarat, Bihar, Haryana and Punjab.

The price of ethanol from C heavy molasses (blackstrap molasses) route be increased from Rs.43.46 per lit to Rs.43.75 per liter. The price of ethanol from B heavy molasses route be increased from Rs.52.43 per lit to Rs.54.27 per liter. The price of ethanol produced from sugarcane juice, sugar, sugar syrup route to be fixed at Rs.59.48 per liter. Additionally, GST and transportation charges will also be payable. OMCs have been advised to fix realistic transportation charges so that long distance transportation of ethanol is not disincentivised. The OMCs are expected to continue according priority of ethanol from sugarcane juice, sugar, sugar syrup, B heavy molasses, C heavy molasses and Damaged Food grains and other sources, in that order.

In a statement issued by the Press Information Bureau (PIB), the distilleries are expected to take benefit of the scheme. Remunerative price to ethanol suppliers will help in reduction of cane farmer’s arrears, in the process contributing to minimizing difficulty of sugarcane farmers. Increased ethanol blending in petrol has many benefits including reduction in import dependency, support to agricultural sector, more environmental friendly fuel, lesser pollution and additional income to farmers.

But the real reason as to what prompted the Center to increase the procurement prices for various categories of Ethanol is India’s consistently rising oil import bills since April this year. As per official data of the Petroleum Planning and Analysis Cell (PPAC), Ministry of Petroleum and Natural Gas, the net Import in value terms for July was Rs 49,717 crore, which is US Dollar terms was 7,198 US$.

The net import of crude oil in terms of crude oil and other petroleum products for July was 17,082 metric tonnes. Out of the total import of crude oil and petroleum products of 22,153 metric tonnes, crude oil alone accounted for 19,344 metric tonnes. As per the PPACs own data the oil import dependency has risen from 82.9 percent in 2017-18 to 83.7 percent in 2018-19. In US Dollar terms the oil import bill has shot up from 87.8 billion US$ to 111.9 US$ in 2018-19.

The first decision to allow five percent ethanol blending with petrol was taken in April 2004. The decision was then only applicable to 10 state’s of – Andhra Pradesh, Goa, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Tamil Nadu, Uttar Pradesh and three Union Territories of Daman, Diu, Dadra and Nagar Haveli and Chandigarh. The fuel price rise and the resultant sky-rocketing inflation had dethroned the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) government led by Prime Minister Atal Bihari Vajpayee in 2004.

Sources in the BJP disclose that Nitin Gadkari who since 2004 had been a strong advocate for EBP was bitterly angry with then Union Minister for Petroleum Ram Naik for failing to clear the EBP policy much before the price rise and mounting oil import bills cost the BJP power in New Delhi and later in several other state’s.