New Delhi: The government on Thursday cut the price of ethanol procured by state-run fuel retailers such as the Indian Oil Corp. Ltd by about 20% to Rs.39 per litre for 2016-17 but cushioned the impact on ethanol suppliers by making the price exclusive of both central and state taxes, which will be paid to them additionally.
The procurement price for 2015-16 was Rs.48.5-49.5 a litre, inclusive of all taxes and transportation charges.
According to an industry executive who asked not to be named, suppliers’ realization as per the price fixed for 2015-16 was about Rs40.5-41 a litre. As per the new price, there is a reduction of up to Rs.2 a litre.
The government effected the slight reduction in sugar mills’ price realization on ethanol in the wake of better sugar prices which offered them an alternate market. Also, the lower oil prices in world markets eased the pressure on oil companies to blend ethanol with auto fuel.
Exclusion of taxes from the procurement price brings clarity on the price as the country is set to introduce a new indirect tax regime of goods and services tax (GST) from the beginning of next financial year.
As per the new ethanol procurement price, oil refiners will compensate suppliers for the 12.36% excise duty on it and for the applicable state level value added taxes (VAT).
Indian Sugar Manufacturers’ Association welcomed the move, but urged the government to reintroduce the excise duty exemption that was given to ethanol meant for blending for 2015-16. That benefit was withdrawn in August.
Abinash Verma, director general, Indian Sugar Mills Association, said the move to fix an ‘ex-distillery price’ for ethanol removed the uncertainties of tax rates including the duties levied by some states.
“By ensuring that GST will be borne by oil marketing companies, the uncertainty of GST rate (expected from April 1, 2017) has also been taken away. However, the government should find ways to compensate or give back the benefit of excise duty waiver announced in June 2015, but withdrawn prematurely in August 2016 to ensure enough ethanol is contracted and supplied for the blending programme,” said Verma.
Ethanol procurement price is administered by the government in order to encourage sugar mills to produce sufficient ethanol for the mandatory 5% blending programme and to give a remunerative price to farmers.
An official statement issued after the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi said that the revised price will apply for the period from 1 December 2016 to 30 November 2017 and that the revised ethanol price will be factored into any fortnightly revision in price of petrol or diesel.
The Union Cabinet cleared setting up an Indian Institute of Management (IIM ) in Jammu in a transit temporary campus from the academic year 2016-17. The project will involve a cost of Rs.61.90 crore for initial four years from 2016-20.
This was part of Prime Minister Modi’s development package for Jammu & Kashmir.
The Cabinet also approved a deal between Export-Import Bank of India and the New Development Bank (NDB), along with other development financial institutions of Brics nations. This is meant to help in the expansion of bilateral trade and economic cooperation in these countries.
A deal between India and the Russian Federation to expand bilateral trade and economic cooperation was also approved.