India's Cabinet Committee on Economic Affairs late Thursday announced changes to the country's ethanol policy that will enable the market to set the price and permit imports if supply falls short of enabling 5% blending into gasoline.
The committee reinforced that mandatory 5% ethanol blending with gasoline should be implemented across the country. The oil ministry will immediately issue a notice for its implementation from December 1, it added.
"The procurement price of ethanol will be decided henceforth between OMCs and suppliers of ethanol. In case of any shortfall in domestic supply, the OMCs and chemical companies are free to import ethanol," the committee said in a statement.
India's three state-owned oil refiners Indian Oil Corp.Ltd., Bharat Petroleum Corp.Ltd. and Hindustan Petroleum Corp.Ltd., are referred to in India as OMCs.
An ethanol blending programme has been implemented in 13 states in India, but the blending level has been around 2% against a mandatory target of 5%, the committee said.
"Procurement of ethanol at a price determined by the market will ensure stability -- to the extent of implementation, this reduces the dependence on imported crude and leads the nation ahead on fuel self-sufficiency," the committee said.
India currently imports more than 75% of its crude oil requirements.
The committee in August 2010 fixed the price of ethanol at Rupees 27/liter ($0.49/liter), which sugar companies said was not high enough to be profitable. Bioethanol is produced from molasses, a by-product of sugarcane.
When the three state-owned oil refiners issued a 12-month term tender to purchase 1.02 billion liters of ethanol in September 2011, they received offers for only 60% of the volume.
