Union Cabinet approves Mechanism for Procurement of Ethanol

On October 29, 2020, the Union Cabinet chaired by PM Modi approved the Mechanism for the public sector oil companies to procure ethanol.

Key Highlights

Under the new mechanism, the prices of ethanol obtained from sugarcane based raw material has been increased for the forth coming sugar cane season. This is between December 2020 and November 2021. Also, the prices of ethanol obtained from C heavy molasses, B heavy molasses have been increased. The increase in price was around Rs 2 to 3 per litre. Additionally, the oil companies will now have to pay transportation charges and GST while procuring ethanol.

Background

The Oil Marketing Companies were selling petrol blended with ethanol under Ethanol Blended Petrol (EBP) Programme. This was applied to the whole of India except Andaman and Nicobar Islands and Lakshadweep Islands. This was to reduce the energy dependence of India from oil imports and also to boost agriculture. Also, Ethanol Procurement Policy was adopted under the EBP programme.
In 2018, for the first time, Government of India notified administered price of ethanol based on the raw material used in production.

Why Sugarcane in specific?

The dues of sugarcane farmers have increased due to lower capability of sugar industry to pay the farmers. Thus, the Government of India has increased the prices of ethanol obtained from sugarcane to help sugar cane farmers.

Ethanol Blended Petrol Programme

It was launched in 2003. The Government of India allows production of ethanol from C-heavy molasses, B-heavy molasses and damaged food grains. Under the programme, the GoI had earlier reduced the GST on ethanol from 18% to 5%.

Under the programme, the GoI has set target of 10% blending target by 2022 and 20% by 2030.

The Oil Marketing Companies are bound to sell ethanol based petrol based on Bureau of Indian Standards Specifications.

Month: Current Affairs - October, 2020