New Formula for Ethanol Pricing Issued

2019 ias preliminary exam test series

The Cabinet Committee on Economic Affairs (CCEA) has approved a new mechanism for fixing the price of ethanol that oil marketing companies (OMCs) would procure from sugar companies, resulting in a Rs 1-1.50 a litre drop.

Oil companies have to necessarily blend up to 10 per cent of ethanol in petrol. The price OMCs would have to pay to sugar companies for the 2016-17 season that started from October 1 was fixed at Rs 39 a litre, excluding any taxes and duties. This price would be for ethanol supplied from December 1 till November 30, 2017.

OMCs would bear the expenditure on excise duty, value added tax/goods and services tax (VAT/GST), transportation charges, etc, as decided by the OMCs.

Earlier, these expenditures were borne by the sugar companies or ethanol suppliers. The government in 2014 had fixed an ethanol price of Rs 48.5-49.5 for ethanol supplied to OMCs which included all the taxes and duties levied by states or Centre.

This effectively meant the ex-factory realisation for sugar companies was Rs 40.5-41 a litre.

Some states levied an extra tax on ethanol and actual realisation for some mills went up to Rs 42 a litre. For such companies, this decision would mean a Rs 3 a litre drop.

To cut import dependence, the government had in 2003 started the programme to blend five per cent of the petrol with ethanol. This was later raised to 10 per cent.

However, since 2006, OMCs hadn’t got offers for the required quantity of ethanol against the tenders floated by them.

Current Affairs for IAS Exam