IOC, sugar cos break ice over ethanol pricing

Mumbai: The face-off between oil companies and sugar makers over the pricing of ethanol--to be blended with petrol--has ended with Indian Oil Corporation (IOC) signing a memorandum of understanding (MoU) with National Federation of Co-operative Sugar Factories Ltd for sustained supplies of ethanol.

While sugar makers have been demanding a price of over Rs 20 per litre, the MoU has now been signed for Rs 18.75 per litre. The actual realisation to sugar mills comes to around Rs 21 per litre due to modvatable benefit, an analyst with Karvy Stock Broking, Vikram Suryavanshi said.

Tenders for supplies of ethanol for the states of Maharashtra, Goa, Gujarat and Haryana have been invited and are under finalisation, IOC director (marketing) Dr NG Kannan said.

Ethanol blending of petrol is back in vogue, in anticipation of bumper sugarcane crop and sugar production ahead coupled with firm crude oil prices. Public sector oil marketing companies have already contracted 210 thousand kilo litres (TKL) of their annual requirement of approximately 435 kilo litres.

The spiralling crude prices have in fact made economic sense to blend ethanol with petrol. According to Mr Suryavanshi, if the crude price falls below $50 per barrel, the ethanol cost higher than Rs 18.75 will not to attractive to petroleum companies.

India examined the feasibility of blending ethanol in petrol with the three pilot projects at Miraj and Manmad in Maharashtra and Bareilly in Uttar Pradesh. Molasses, the by-product derived while producing sugar, is the key ingredient for producing ethanol.

-CORPORATE BUREAU (Financial Express) January 12, 2006