Sugar mills ask PSU oil cos to float third tender for ethanol supply
The Indian Sugar Mills Association (ISMA) asked the state-controlled oil marketing companies (OMCs) to float a third tender for fuel ethanol procurement in 2019/20, expecting an oversupply of fuel grades and following a higher-than-expected sugarcane
Source: Cogencis | 8 Apr, 2020 | 11:12 AM | By Preeti Bhagat | Edited by : Avishek Dutta
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New Delhi, Apr 8 : Sugar mills have asked oil marketing companies to float a third tender for procurement of ethanol as distilleries want to supply some more biofuel in the current year because new capacities are coming on stream, two senior industry officials said.
“Investments are happening and new capacities are coming up every month, every second month. There are some more people who want to supply small-small-small quantity. It is not macro,” Indian Sugar Mills Association Director General Abinash Verma said.
This year, mills already on stream were allowed to participate in the first two tenders, unlike last year. As a result, new capacities being added or in the process of starting production couldn’t offer their quantity or participate in the ethanol tenders.
In the last two tenders floated by oil companies for supply of 5.11 bln ltr of anhydrous denatured ethanol in 2019-20 (Dec-Nov), mills across the country have offered to supply only 1.95 bln ltr of the biofuel.
The quantity offered by mills in the first two tenders was very low because of low availability of sugarcane due to drought in Maharashtra and Karnataka in 2018 and floods in Sep-Oct.
It is difficult to estimate the quantity mills would offer in the third tender, but whatever comes would be good for oil companies and the country, Verma said.
Bharat Petroleum Corp, Indian Oil Corp, and Hindustan Petroleum Corp buy ethanol from sugar mills at fixed prices as it is mandatory to blend petrol with the biofuel.
Mills have also asked for a window of five days at the beginning of every subsequent month so that mills that have set up new capacities or expanded existing ones can offer to supply during that period, after quantities are finalised in the first tender.
“…OMCs can examine the offers and accordingly give depot-wise allocation to all those sugar mills, distilleries who have given offers. Whatever documents are required, can be specified and taken during this period. The only information required to be put out by the OMCs before the first of every month will be depot wise balance required quantities,” the official said.
Verma said it would be very easy for mills and distilleries to make their offers without waiting for a fresh tender if the five-day window was provided.
In 2018-19, oil companies had floated a tender to purchase 3.29 bln ltr of ethanol, while sugar mills supplied 1.88 bln ltr, and the blending level achieved was 4.92%, according to data from the Indian Sugar Mills Association.
To increase the level of blending and boost production of the green fuel, the Centre had last year raised prices at which oil marketing companies buy ethanol from sugar mills. It has also allowed oil companies to buy ethanol made from sugar syrup at the same price as that made from cane juice.
Increased diversion of sugarcane towards ethanol would help India reduce the sugar glut in the market. The country is holding record-high carryover stock of 14.6 mln tn sugar for the season started Oct 1.
ISMA expects sugar production to decline by 850,000 tn this year because cane juice and B-molasses have been diverted towards producing ethanol.