The Union Cabinet on Thursday approved a mechanism to revise the price of ethanol extracted from sugarcane, causing a reduction in its rate by Rs 3 to Rs 39 per litre, PTI reported. Petroleum Minister Dharmendra Pradhan said the cost of sugar and demand-supply scenario will be determining factors in the ethanol-pricing structure. The government had ordered an alteration in the country's fuel mix by permitting the blending of 10% ethanol in petrol, in its attempt to reduce dependence on imports.
Pradhan said the government was attempting to move towards a "market-driven mechanism for ethanol prices". The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved the system to help public sector Oil Marketing Companies implement the Ethanol Blended Petrol Programme launched in 2003.
The National Democratic Alliance government had set the price of ethanol at Rs 48.50-49.50 per litre in December 2014. Pradhan said, "The rate paid to sugar mills was never Rs 48.50. It was Rs 42. That price [Rs 48.50] was after including excise duty, VAT and other levies and transportation costs."
The price of ethanol will be Rs 39 per litre from December 1, 2016, to November 30, 2017, while additional charges will be decided by Oil Marketing Companies. These rates, the government-issued statement said, may be revised according to the economic situation. The supply of ethanol and state-specific issues had been hampering the companies' implementation of the order.
The decision to increase the price of ethanol reportedly helped increase the supply to 67.4 crore litres in 2014-15. Officials estimate the supply for 2015-16 to touch 120 crore litres.