CCEA approves revision of ethanol price for supply to Public Sector OMCs

The Cabinet Committee on Economic Affairs (CCEA) has approved the mechanism for revision of ethanol price for supply to Public Sector Oil Marketing Companies (OMCs).
The revised administered price will facilitate OMCs to carry out the Ethanol Blended Petrol (EBP) Programme for the next sugar season 2016-17.
Key facts

• The revision of ethanol prices will facilitate continuation of Government policy in providing price stability and remunerative prices for ethanol suppliers.
• Charges will be paid to the ethanol suppliers as per actuals in case of Excise Duty and GST/ VAT and transportation charges as decided by the OMCs.
• However, these prices of ethanol can be reviewed and suitably revised by Central Government at any time during ethanol supply period (from 1 December, 2016 to 30 November, 2017) depending upon prevailing economic situation and other relevant factors.

Background

• The Ethanol Blended Petrol (EBP) Programme was launched by the Central Government in 2003 to promote the use of alternative and environment friendly fuels.
• It was intervention sought to reduce import dependency for energy requirements and environment friendly measure to reduce vehicular pollution.
• However, since 2006, OMCs were not able to meet required quantity of ethanol demand against the tenders floated by them. The various constraints for it were like State Specific issues, Supplier related issues including Pricing issues of ethanol.
• In order to augment the supply of ethanol, a new mechanism for pricing of ethanol was placed in where Government decided delivered price of ethanol at OMC depots. The decision has helped in significantly improving the supply of ethanol.

What is Ethanol Blending?

• The ethanol blending is process of mixing petrol with ethanol. The mixture is called as Ethanol Fuel / Gasohol which is considered as a quasi-renewable energy.
• Ethanol is biofuel derived from Sugarcane molasses (by-product in the conversion of sugarcane to sugar), corn, sorghum etc.
• In India, practice of blending ethanol was started in 2001. Ethanol blending for first time was mention in the Auto fuel policy of 2003.
• Later, the National Policy on Bio-fuels, 2009 made mandatory for oil companies to sell petrol blended with at least 5% of ethanol.

Benefits of ethanol blending

• It reduces the vehicular emissions especially carbon monoxide emissions.
• It is cheaper than petrol as it is cheaper to manufacture.
• It decreases a nation dependence on foreign oil.
• Ethanol has a higher octane rating than ethanol-free petrol.
• In case of India, ethanol production can give higher sugarcane price for farmers which can help in rural prosperity.

Month: Current Affairs - October, 2016