The Union Cabinet at its meeting, likely to take place on Monday, is set to consider a proposal to decide on the pricing formula for procurement of bio-ethanol by Oil Marketing Companies (OMCs) to sell 10 per cent ethanol-blended petrol and diesel.
For long, a decision on this has been pending despite the pressure being put by ethanol manufacturers on government to revise the ad hoc price fixed in 2010 for next one year at `27 per litre. Once the price issue is resolved, the OMCs will again start lifting ethanol from the market and 10 per cent ethanol-blended petrol will cost about `3 less than the current market price and almost equal to this amount the government’s subsidy burden on diesel will also reduce, sources said, adding that since August 2011, the OMCs have not been buying ethanol and so the product is being exported to EU countries.
Confirming that the issue is high on the agenda of the meeting of the Union Cabinet, which will be chaired by Prime Minister, sources said, “A proposal from the ministry of new and renewable energy for the approval of the pricing formula for procurement of bio-ethanol suggested by the expert committee, headed by member planning commission Soumitra Chaudhari, coupled with a floor price and ceiling price recommended by PMEAC is likely to be discussed.”
The government has also planned to increase ethanol blending from current five per cent to proposed 10 per cent and take it up to 20 per cent, so that the import bill of on fossil fuels would come down substantially, sources informed.
The Chaudhari committee has suggested linking of ethanol price with international price of petrol, with a discount of 20 per cent. It has also recommended fixing floor and ceiling price in the range of `28-29 a litre. However, ethanol manufacturers have been pressing for `35 per litre and claim that even at this price the retail cost of per litre petrol would come down by `3.
The government had decided for a mandatory 5 per cent ethanol blending with petrol (EBP) programme in October 2007.