In order to Control Oil Prices, Govt. Hikes Ethanol Prices

In a move to cut India's oil import dependence as well as give a higher price for sugarcane, the Government of India hiked the price of ethanol, used for doping in petrol, by almost Rs 3 per liter to Rs 43.70. According to sources, it will be effective from December 2018. India, which is over 80 percent dependent on imports to meet its oil needs, has mandated blending of up to 10 percent ethanol in petrol but inadequate availability has restricted this under 4 percent.

This move is likely to make a strong impact on the stock markets especially on oil& gas, energy stocks like BPCL, HPCL, IOCL and other oil marketing companies.

The move comes at a time when the sugar industry needs to be bailed out and it will help them clear about Rs 20,000 crore cane arrears. The Government had also recently announced relief measures of Rs 8,500 crore for the sugar sector, including a soft loan of Rs 4,500 crore for adding ethanol capacity, the creation of buffer stock of sweetener and production-linked subsidy to cane growers.

Higher price for ethanol extracted in the process of making sugar from sugarcane will incentivize higher ethanol production. The higher price for this grade of ethanol produced from C-molasses will be for sugar marketing year starting December 2018, Finance Minister Piyush Goyal told reporters after a meeting of the Union Cabinet headed by Prime Minister Narendra Modi.

For the first time, the Government also fixed the price of ethanol produced from intermediary or B-molasses at Rs 47.49 per litre -- a move that would help mills divert cane juice for ethanol manufacturing during surplus years. So far, the price was only fixed for ethanol produced from C-molasses or final molasses. Molasses is a viscous product resulting from refining sugarcane or sugar beets into sugar.

The Cabinet Committee on Economic Affairs (CCEA) has approved the mechanism for procurement of ethanol by public sector oil marketing companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Programme with respect to price revision, an official statement said.