Govt Said to Have Hiked Ethanol Rates Fearing Fall in Blending as Distilleries Close Operation

by Prabhudatta Mishra (Business Line) According to the new rates effective from August 7, the purchase price of ethanol produced from rice has been increased by ₹4.75/litre to ₹60.29/litre and for ethanol produced from maize, price has been hiked by ₹6.01/litre to ₹62.36/litre --

In order to ensure 12 per cent blending target is achieved this year after the Food Corporation of India (FCI) halted rice supply for ethanol production , the government is believed to have raised prices of ethanol made from rice and maize to help distilleries restart production. However, top officials refused to comment saying notification is yet to be released.

According to trade sources, purchase price of ethanol by oil marketing companies (OMCs) has been increased by ₹4.75/litre to ₹60.29/litre when the biofuel is made from damaged/broken rice (purchased from open market) for remaining part of current ethanol year (until Oct 31, 2023). Also the new rate of ethanol will be ₹62.36/litre when it is to be produced from maize, an increase of ₹6.01/litre.

Until June 23, the OMCs have achieved 11.77 per cent blending since ethanol season started from December 2022.

Food Secretary Sanjeev Chopra, on August 4, said that an inter ministerial group has been constituted to recommend revised ethanol prices for next season in view of expected higher availability of sugarcane that may increase diversion towards ethanol. But he did not rule out the possibility of recommending revision (hike) in prices of ethanol, produced from some feed stocks, for current season itself. The committee is likely to submit its recommendations in a month as the new ethanol season will start from November 1.

Actually, sugar is not diverted to produce ethanol, which is made out of molasses (by-product of sugar) or sugarcane juice/syrup.

From mid-July, FCI has stopped ₹20/kg rice supplied to produce ethanol, which is attributed to the political controversy created due its withdrawal of an approval within 24 hours with regard to supply of rice to Karnataka for human consumption at ₹31/kg, citing insufficient availability in central pool. READ MORE

Excerpt from Live Mint: The temporary ban on broken rice should encourage relying on maize more because rice is the biggest water guzzler.

The government should substitute water-guzzling rice with maize for ethanol production as part of a repurposed policy package in order to conserve water while moving toward the target of 20% ethanol blending in India’s fuel mix by 2025, leading agricultural economist Ashok Gulati said.

In an interview, Gulati, distinguished professor at Icrier, said a switch could bring policies in tune with protecting the planet while also ensuring high profitability to farmers.

His comments come after a ban on supplies of rice to ethanol distilleries—enforced to check prices—sparked concerns that the government may not be able to meet the ethanol target. Rice is the commonest grain used for making ethanol in India.

At present, FCI must buy rice for PDS (public distribution system). As the broken rice cannot be given under PDS, it is being supplied to distilleries half the price. This is a very inefficient way of doing things. Your economic cost is ₹37 a kg for the rice that you bought, and you pass on the burden to taxpayers by giving subsidies to distilleries that fall under good income groups. So, why do that?

What else can the government do?
I do feel there is ample opportunity provided you play your cards well. The temporary ban on broken rice should encourage relying on maize more because rice is the biggest water guzzler. READ MORE