Mumbai, June 18 Maharashtra's sugar co-operatives are all set to reap a bonanza after union petroleum minister Murli Deora agreed to higher prices for ethanol to be purchased by state-owned oil companies.
Public sector oil companies will now pay Rs 21.50 per litre of ethanol. Transport and other charges to transport ethanol to the oil companies would be extra, according to state government sources.
Maharashtra is one of the few states which is aggressively pushing for oil companies to blend motor fuels with 10 per cent ethanol. At present, the laws allow for a blend of five per cent ethanol. However, even this has not been made possible as sugar producers and oil companies could not agree on the procurement price of ethanol.
"The oil companies had earlier agreed to pay between Rs 19.50 and Rs 20.50 per litre of ethanol," says Rajgopal Devara, commissioner for sugar. Sources say, the state's sugar co-operatives, which were to supply some 80 milllion litres of ethanol to petroleum companies, sold only a fraction of the amount. "Sugar co-operative found it more profitable to sell ethanol to distilleries," says a sugar co-operative official.
Maharashtra has a flourishing country liquor industry, which sources ethanol from the sugar co-operatives by paying nearly Rs 22-23 per litre. Unlike in Brazil, ethanol is produced from molasses, a by-product of the sugar industry. However, as India struggles with high oil prices, a few sugar companies in northern India are experimenting with directly manufacturing ethanol from sugarcane juice. However, this technology is expensive and ethanol thus produced would be around Rs 24 per litre.
Several of Maharashtra's politicians across party lines who control sugar co-operatives have been pushing higher prices of ethanol pegged to global oil prices in order to reap huge profits.
Recently, when the Centre asked state governments to reduce excise duties after hiking petroleum prices, Maharashtra's finance minister Jayant Patil said New Delhi could pay slightly higher for ethanol and bring down the country's crude import bill substantially.
With the Centre offering to pay higher procurement prices for ethanol, the Maharashtra government is to finalise the procedure to buy ethanol from sugar co-operatives in the state.
Prominent sugar companies like Bajaj Hindusthan and Renuka Sugars are aggressively installing technology which could enable them to switch between sugar and ethanol depending upon demand.