New Delhi, June 13:

The high price quoted by global ethanol suppliers seems to have forced public sector oil marketing companies (OMCs) to abandon their plans of importing the commodity, to comply with the mandatory 5 per cent blending programme.

To meet the Government target of five per cent blending of ethanol with petrol by June 30, the OMCs had invited bids from both domestic and global players. The global suppliers had quoted Rs 72 to Rs 90 a litre, almost twice the rate quoted by domestic players — at Rs 38 to Rs 45 per litre. This huge gap between prices had put the OMCs in a fix.

Tenure of tenders

The OMCs now have not extended the tenure of the global tenders that expired on May 25, sources said. The validity of the tenders for domestic suppliers, which ended on May 27, has, however, been extended by two months.

As a result, OMCs may end up relying on domestic sugar companies to source the required ethanol for blending — estimated at 105 crore litres for the year ahead. Domestic mills had committed to supply 55 crore litres in the current sugar season ending September. They were even willing to supply more from October, when the new crushing season starts and had urged the OMCs to float a supplementary tender.

Additional demand

Meanwhile, the OMCs have issued letters of intent to domestic suppliers for an additional 14 crore litres, totalling 39 crore litres so far. But what has triggered concerns among the sugar companies is the delay in placement of orders by the OMCs for ethanol supplies.

Sugar companies are reeling under the impact of high production costs in a bearish market. As the cane crushing season for 2012-13 has ended, millers are holding on to ethanol stocks anticipating orders from OMCs.

Each tonne of molasses yields an average of 250 litres of rectified spirit (alcohol or ethanol). About half the estimated 250 crore litres of ethanol produced domestically is used for production of potable alcohol and the rest for industrial and other uses.