Earlier, the government was considering a proposal to increase the price at which oil marketing companies buy ethanol derived from food grains by 10 rupees per ltr..
The Centre has been looking at ways to divert excess rice available in the central pool for production of ethanol. It was of the view that a hike in the procurement price of the ethanol-derived from food grains would encourage ethanol-makers to purchase more rice from the central pool.
However, ethanol manufacturers had demanded that price of ethanol derived from food grain be raised to 59.48 rupees a ltr, at par with ethanol made directly from 100% cane juice, to make the ethanol production profitable.
The government auctions rice at 2,250 rupees per 100 kg at the open market sale scheme, and at this price ethanol production is not profitable for the makers.
Currently, oil manufacturing companies procure ethanol derived from grains at 47.63 rupees a ltr. The government aims to achieve 7% ethanol blending with petrol in 2019-20, and 10% by 2020-22. However, without an increase in the ethanol output from foodgrains, the government may miss the blending target.
In the two tenders floated so far for 2019-20 (Dec-Nov) by oil marketing companies, bids for supply of 148.9 mln ltr have been accepted which will be supplied by standalone grain-based distilleries, an industry official said.
In 2018-19, grain-based distilleries had contracted to supply 167.7 mln ltr of ethanol derived from food grain to oil marketing companies but ended up supply only 95 mln ltr of the biofuel, data from Indian Sugar Mills Association showed.