Indian Oil Corp (IOCL), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) will together purchase 120 crore litre of ethanol in the sugar year beginning November 2015 to meet the blending target, the minister said on Thursday. “We expect to do more. The momentum has built up,“ he said.
In the previous years, the ethanol blending ratio has remained below 3%. The government has now brought the focus on ethanol blending by resolving pricing uncertainties around the biofuel and encouraging oil companies to procure more.
Last year, the government fixed the minimum delivered price of ` . 48.5049.50 per litre for ethanol, bringing in pricing certainty for suppliers, although a collapse in crude prices remain a hindrance.
The government had also scrapped the excise duty on ethanol supplied for blending with petrol. The production cost of ethanol today is abo . 42litre.ut ` India today consumes 2,800 crore litres of petrol and 8,800 crore litres of diesel. For achieving the 5% blending target, companies would need to procure an additional 140 crore litres of ethanol and biodiesel.
Pradhan said lower crude oil prices will not impede companies' progress towards purchasing more bio fuels.
Crude prices move in cycles and so the country has to take a long-term view, he said, adding that India has the potential to replace up to 20% of its fossil fuel demand with biofuel.India has a business potential of `.2 lakh crore in biofuel, he said.
Oil companies have already finalised contracts to buy four crore litres of biodiesel and plan to procure more for blending with diesel this year, he said.
In 2015, state oil firms had sought to buy 266 crore litres of ethanol and 850 million litres of biodiesel.An increased consumption of local biofuels can help bring down import bill for India. The country imports 80% of its crude oil requirement.
Higher consumption of biofuel can also help reduce air pollution in cities and raise farmers' income.