Having incurred savings of Rs. 154 crore (Rs. 1.54 billion) from ethanol-blended petrol last year, the oil marketing companies have floated tenders to purchase 1.01 billion litres of ethanol for blending.The sugar industry is gearing up to offer the entire quantity for the tenders, which will close on September 2.
Supplies will be made during the new sugar year beginning October.
Indian Oil Corporation, the biggest OMC, has floated a tender to buy 455 million litres, while Bharat Petroleum and Hindustan Petroleum intend to purchase 283 and 277 million litres, respectively, said sugar industry officials.
OMCs currently buy ethanol at Rs. 27 per litre. This price is adhoc and is expected to go up if the government accepts recommendations of the Saumitra Chaudhuri committee that has suggested linking ethanol to petrol prices of the previous quarter after making adjustments for ethanol's calorific value, mileage and tax incentives.
Last year, OMCs had planned to purchase 1.04 billion litres. The sugar industry, led by companies like Renuka Sugars, Bajaj Hindusthan and Balrampur
Chini, offered around one billion litres.
However, final contracts were entered for supply of 559 million litres as standalone ethanol producers in states such as Maharashtra failed to qualify on technical grounds.
Owing to the price differential between ethanol and petrol prices, blending has helped OMCs to save even as they incurred loss on petrol sale due to non-revision of prices.
According to the information given to the Parliament by R P N Singh, minister of petroleum, the OMCs made savings of Rs. 154 crore from ethanol blending in last financial year.
During 2008-09 and 2009-10, the combined savings from blending to OMCs was Rs. 153 crore (Rs. 153 billion).
As things stand, the OMCs are certain to save more due to blending since volumes this year will be higher due to better sugarcane production.
Blending of ethanol at five per cent with petrol began in 2007 but was stalled in 2009 due to low supply on account of a dip in sugarcane output and default in supplies by standalone ethanol manufacturers.
It was reintroduced in November 2010.
Ethanol is considered a 'green' fuel and blending with petrol also helps reduce India's heavy dependence on crude oil imports.
