Informist, Friday, May 17, 2024
By Afra Abubacker
NEW DELHI – Oil marketing companies have started procuring ethanol, including ethanol made from sugarcane juice and B-heavy molasses, for the third quarter (May-Jul) after court orders mandated them to lift the contracted biofuel from sugar mills, top government and industry officials said.
In March, oil companies invited bids for the supply of 1.5 bln ltr ethanol for May-Jul but excluded ethanol made from sugarcane juice and B-heavy molasses as the government had restricted the procurement of biofuel made from the aforementioned feedstocks. Oil companies purchase ethanol to blend the biofuel with petrol and achieve blending targets.
However, the oil marketing companies are procuring ethanol from mills for the third quarter after the Aurangabad bench of the Bombay High Court asked them to purchase the contracted ethanol from sugar mills.
"There were 37 court orders asking OMCs (oil marketing companies) to pick up the contracted 18-20 crore ltr (180-200 mln ltr) ethanol from mills," Prakash Naiknavare, managing director of National Federation of Sugar Cooperative Factories, told Informist.
The oil marketing companies have now adjusted for the third quarter requirement, Naiknavare said. "Had these court orders not been in place, the OMCs would have issued tenders (for ethanol supply) for Q3 and not Q4."
On Wednesday, Bharat Petroleum Corp Ltd, on behalf of oil companies, issued the much-awaited tender for ethanol supply for the fourth quarter (Aug-Oct) with provisions of giving preferential allocation to bidders whose initial allocation of sugarcane juice and B-heavy molasses was reduced following the government's restrictions.
Oil companies will give preferential allocation to bidders whose initial allocation of sugarcane juice and B-heavy molasses was reduced following the government's restrictions, the tender said.
The tender was issued after the government, on Apr 24, allowed mills to produce ethanol from the B-heavy molasses inventory they had as of Mar 31. However, the ethanol manufacturers expected the tender to be issued for the third quarter (May-Jul).
In February, the Bombay High Court asked oil companies to purchase the contracted ethanol from sugar mills after sugar factories petitioned against the government order dated Dec 7, which capped sugar diversion for ethanol production from sugarcane juice and B-heavy molasses to 1.7 mln tn amid concerns about lower production of sugar.
Ethanol is made from starch-containing feedstocks like molasses and grains. Sugarcane juice, B-heavy molasses, and C-heavy molasses are sugarcane by-products obtained during sugar extraction. Sugarcane juice has the most sugar content, followed by B-heavy and C-heavy molasses.
Mills argued that oil companies must abide by the contract and purchase 75% of the production as they have expanded their ethanol capacities based on previous agreements with the government. Further, interest subvention on capacity expansion is only available to those units that supply at least 75% of the ethanol produced to oil companies, mills had argued.
In addition, mills pointed out that ethanol is inflammable and storing it on their premises is a safety risk. "Per contra, the OMCs have huge storage capacities and they be ordered to receive the entire manufactured quantity of ethanol," the court order said.
Asked why oil companies issued the tender for ethanol supply for the fourth quarter (Aug-Oct) instead of the third, a top government official said: "It's completely a business call. OMCs would have met the requirement for Q3. We are already in May and only two months are left.”
“Since (ethanol) supply starts only from August, mills will have to wait till then to supply the allocated quantity," an industry source said. This will block liquidity and add storage and interest costs to mills, an industry official said.
"OMCs are committed to EBP (ethanol blending programme). They would not allow any wastage of ethanol stock, or delay the procurement," the official said.
To reduce dependence on crude oil, the government has set a target of achieving 15% blending of ethanol with petrol in 2023-24, and 20% in 2025-26. As of Mar 31, oil marketing companies procured 2.24 bln ltr of ethanol in the first five months of ethanol supply year 2023-24 (Nov-Oct) and achieved 11.9% blending with petrol.
"Despite feedstock challenges, India could maintain what was achieved (in ethanol blending percentage)," the official said. In the first five months of the ethanol supply year 2023-24, oil marketing companies achieved a cumulative blending with petrol of 11.9%, in line with that of last year.
However, industry experts doubt whether India will achieve the 15% blending by October amid various restrictions on feedstocks for biofuel production. "The target of 15% ethanol blending is only possible by December. However, the 20% target for 2025-26 seems difficult," Naiknavare said.
Asked if India will import ethanol or feedstock to achieve its blending targets, the official said: "The government is only worried about achieving the 20% target. The rest are only indicative targets." End
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