The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has approved the mechanism for revision of ethanol price for supply to Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Programme in the following manner:

i. For the next sugar season 2016-17 during ethanol supply period from 1st December, 2016 to 30th November, 2017, the administered price of ethanol for the EBP Programme will be ₹ 39/- per litre.

ii. Additionally, charges will be paid to the ethanol suppliers as per actuals in case of Excise Duty and VAT/GST and transportation charges as decided by OMCs.

iii. If the need arises to increase/reduce the retail selling price of Petrol by Public Sector OMCs, then such increase/reduction would proportionately factor in the requirement of maintaining the fixed cost of purchase of ethanol during the ethanol supply year.

iv. The prices of ethanol will be reviewed and suitably revised by Government at any time during the ethanol supply period that is from 1st December, 2016 to 30th November, 2017 depending upon the prevailing economic situation and other relevant factors.

The revision in ethanol prices will facilitate the continued policy of the Government in providing price stability and remunerative prices for ethanol suppliers.

Background: Ethanol Blended Petrol (EBP) Programme was launched by the Government in 2003 which has been extended to the Notified 21 States and 4 Union Territories to promote the use of alternative and environment friendly fuels. This intervention also sought to reduce import dependency for energy requirements.

However, since 2006, OMCs were not able to receive offers for the required quantity of ethanol against the tenders floated by them due to various constraints like State Specific issues, Supplier related issues including Pricing issues of ethanol.

In order to augment the supply of ethanol, a need was felt to put in place a new mechanism for pricing of ethanol. Accordingly, the Government on 10th December, 2014 decided that the delivered price of ethanol at OMC depots would be fixed in the range of ₹ 48.50 per litre to 49.50 per litre including Central/State Government taxes and transportation charges.

The decision has helped in significantly improving the supply of ethanol. Ethanol supplies increased to 67.4 crore litres in 2014-15 and the projected supplies for ethanol supply year 2015-16 are around 120 crore litres. The objective to fix the delivered price of ethanol has been achieved to a large extent. In view of firming of sugar prices, falling crude prices and consequent under-recoveries of OMCs on this account, a need to re-examine the pricing of ethanol under EBP Programme has been felt.

Ethanol pricing mechanism revised for fuel blending, ensuring administered purchase price and cost pass through to protect supplier remuneration. The pricing mechanism for ethanol under the Ethanol Blended Petrol Programme sets an administered purchase price for the ethanol supply year, with excise duty, VAT/GST and transportation charges payable to suppliers as actuals, and requires proportionate adjustment of petrol retail price changes by Public Sector OMCs to maintain the fixed cost of ethanol purchase; the government may review and revise ethanol prices during the supply period to ensure price stability and remunerative returns for suppliers.