CCEA Raises Ethanol Procurement Price

Context

On January 29, 2025, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved an increase in the ethanol procurement price for Public Sector Oil Marketing Companies (OMCs) for the Ethanol Supply Year (ESY) 2024-25. This decision is a significant step in advancing the government’s Ethanol Blended Petrol (EBP) programme, which aims to promote the use of alternative fuels and reduce reliance on imported crude oil.

Details of the Price Hike

• New Pricing Structure: The ex-mill price of ethanol blended from C Heavy Molasses (CHM) has been increased to ₹57.97 per litre from the earlier ₹56.58 per litre that is an increase of about 3 percent. This adjustment will apply from November of the calendar year 2024 to the end of October of calendar year 2025. Meanwhile, to some extent, B-heavy molasses and sugarcane-derived ethanol’s have retained their prices unaltered at ₹60.73 and ₹65.61 per litre correspondingly.
• Reason for Raising Price: Government expects this is that these prices will help guarantee adequate ethanol supply to meet the objective of blending set for the subsequent years. Earlier the 2030 target in blending of ethanol in petrol has been fixed to 20% but now the government made ethanol blending as compulsory up to 5% from 2022 and up to 20% by 2025-26. An increase in the procurement prices is also expected to remunerate suppliers of ethanol adequately and in turn assist sugarcane farmers to improve on their income.

Economic Implications

• Foreign Exchange Savings: Also, the socioeconomic benefits of EBP need to be viewed from an angle of saving foreign exchange for India over the last decade. The rate at which OMCs have incorporated ethanol has led to a cumulative saving surpassing ₹1.13 trillion and reduction in the import of about 19.3 million metric tons of crude oil. This reduction of crude oil dependence helps in the stability of the economy as well as the achievement of energy security.
• Environmental Impact: Ethanol as an alternative fuel has several positives if it is regarded as an environmental factor. Ethanol is less pollutive when burnt as a fuel, as compared to the conventional fossil fuels, and thus destroys the greenhouse gases and other toxic compounds in the air. This brings the governments’ plan in realization of using sustainable energy into perspective as the world pursues this kind of measures.

Support for Agriculture

• Impact on Sugarcane Farmers: The revised procurement prices are designed to benefit sugarcane farmers by ensuring they receive fair compensation for their produce. By maintaining separate payments for Goods and Services Tax (GST) and transportation costs, the government aims to enhance profitability for farmers engaged in ethanol production. This move is crucial as it links agricultural productivity with energy production, fostering a symbiotic relationship between these sectors.
• Investment in Infrastructure: The EBP programme has spurred significant investments in distillation capacity and infrastructure development across India. As of now, the total ethanol distillation capacity is projected to reach 1,713 crore litres per annum, supported by long-term off-take agreements and incentives for dedicated ethanol plants. This investment not only creates jobs but also strengthens rural economies.

Future Outlook

With the target of achieving 20% ethanol blending by 2025-26, OMCs are expected to achieve an 18% blending rate for ESY 2024-25. The government’s proactive approach towards expanding the EBP programme underscores its commitment to energy independence and sustainable development.

Conclusion

The recent approval by the CCEA for increased ethanol procurement prices is a strategic move aimed at enhancing energy security, supporting agricultural livelihoods, and promoting environmental sustainability. As India continues on its path towards greater ethanol integration into its fuel supply chain, this initiative represents a significant step towards achieving broader economic and ecological goals. The government’s focus on renewable energy sources will likely play a pivotal role in shaping India’s energy landscape in the coming years.

 Source: The Hindu

UPSC Prelims Practice Question

Q. Which of the following statements regarding ethanol is/are correct?

1. Ethanol can be blended with petrol to reduce dependence on fossil fuels.
2. Ethanol production in India primarily depends on sugarcane and maize.
3. The National Policy on Biofuels 2018 aims to achieve 50% ethanol blending by 2030.

Select the correct answer using the codes given below:

a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3

Answer: (a)

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