NEW DELHI – Sugar mills have offered to supply 315 mln ltr of anhydrous denatured ethanol to state-owned oil marketing companies in the second round of bidding that ended on Feb 6, two industry sources said.
Of the total 48 mills which showed interest in supplying the biofuel, two were disqualified as they failed to submit proper documents, despite several reminders, an official with a leading Uttar Pradesh-based mill said.
State-owned oil marketing companies had invited expressions of interest to purchase around 2.53 bln ltr in January.
"Quantity offered by mills is very low because of low availability of sugarcane due to drought in Maharashtra and Karnataka last year (2018) and floods in the recent months (Sep-Oct)," the official said.
In the first tender floated in September, oil companies were interested in buying 5.11 bln ltr of ethanol, but sugar mills offered to supply only 1.63 bln ltr of the biofuel.
Bharat Petroleum Corp, Indian Oil Corp, and Hindustan Petroleum Corp buy ethanol from sugar mills at fixed prices as it is mandatory to blend petrol with the biofuel.
Of the ethanol offered by sugar mills in the second round, 95 mln ltr is likely to be derived from B-heavy molasses and 69 mln ltr from C-heavy molasses, the official said. He said 35 mln ltr of the biofuel would be derived from 100% cane juice and 114 mln ltr from damaged foodgrains.
Uttar Pradesh, the largest producer of the sweetener, offered the highest quantity at 109 mln ltr, followed by Punjab and Karnataka at 66.7 mln ltr and 50.1 mln ltr, respectively.
Maharashtra, the second-largest producer, offered to supply 40 mln ltr ethanol, and Haryana and Bihar offered 31 mln ltr and 11 mln ltr, respectively. Gujarat offered the lowest quantity at 1.7 mln ltr.
The ethanol will have to be supplied during the Mar-Nov period.
In 2018-19 (Dec-Nov), oil companies had floated a tender to purchase 3.29 bln ltr of ethanol, while sugar mills supplied 1.88 bln ltr, and the blending level achieved was 4.92%, according to data from Indian Sugar Mills Association.
To increase the level of blending and boost production of the green fuel, the Centre last year raised prices at which oil marketing companies would buy ethanol from sugar mills.
The government increased the price of ethanol made from B-heavy molasses to 54.27 rupees a ltr for 2019-20 (Dec-Nov) from 52.43 rupees a ltr in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to 59.48 rupees a ltr and 43.75 rupees a ltr, respectively.
The government has also allowed oil marketing companies to buy ethanol made from sugar syrup at the same price as that made from cane juice.
Increased diversion of sugarcane towards ethanol would help India reduce the sugar glut in the market. The country is holding record-high carryover stock of 14.5 mln tn sugar for the season that started on Oct 1.
Indian Sugar Mills Association expects sugar production to decline by 850,000 tn this year because cane juice and B-molasses have been diverted towards producing ethanol.