Grain-based ethanol makers urgently seek a hike in procurement price
Grain-based distilleries are urging the Indian government to instruct oil marketing companies (OMCs) to raise ethanol procurement prices to counter significant losses. These distilleries argue that ethanol prices should reflect full raw material costs, including MSP, taxes, and transport. They also advocate for continuing surplus rice supplies from the Food Corporation of India (FCI) to sustain ethanol production until maize output increases.
Grain-based distilleries have asked the Centre to direct oil marketing companies (OMCs) to urgently raise the procurement price of ethanol produced from maize and damaged food grains to save them from incurring heavy losses in running their plants
The distilleries in a presentation made to some of the top officials in the government a few weeks ago said that the price at which OMCs purchase ethanol produced from grains should be fixed based on total input or raw material cost that includes the minimum support price (MSP), mandi tax, storage and transport costs.
The supply of the surplus Food Corporation of India (FCI) rice should be continued for the next 3-4 years till maize production in India is increased substantially, they said.
The Central government recently resumed after over a year the sale of surplus FCI rice for the production of ethanol and allocated 2.3 million tonnes of rice for it.
Manufacturers of grain-based ethanol demand that uniform prices be fixed for ethanol produced from all grain sources. They also said a roadmap was needed for the consumption of ethanol beyond 2025 through flex-fuel vehicles.
The makers of grain-based ethanol said they were incurring a loss of Rs 9.28 per bulk litre (BL) in manufacturing ethanol from maize and a loss of Rs 8.36 per BL for manufacturing ethanol from damaged foodgrains.
They said if they shut down their plants, they will incur a loss of around Rs 9.51 per bulk litre.
“The companies are incurring losses in making ethanol from grains. Since the loss is highest in keeping the plants shut, they, therefore, are just managing to run the units,” said a senior industry official.
He said the acute shortage of maize and damaged foodgrains, and a spike in prices led to this situation.
Though the raw material rates have gone up, there has not been a commensurate increase in purchase price, resulting in mounting losses.
“At the current price of maize, the dedicated ethanol plants are making a loss of around Rs 10.28 per litre which in case of damaged foodgrains is around Rs 10.18 per litre,” CK Jain, President Grain Ethanol Manufacturers Association, told Business Standard.
He said the OMCs should immediately increase their purchase price of ethanol produced from grains by at least Rs 4-5 per litre from the current levels.
Currently, the purchase price of ethanol produced from maize is around Rs 72 per litre while that from damaged foodgrains is about Rs 64 per litre.
According to industry estimates, in the 2023-24 supply year that ends in October, the ethanol makers procured 5.5 million tonnes of maize to produce around 2 billion litres of fuel.
Maize production in India in 2024 is estimated to be around 38 million tonnes, of which almost 95 per cent is consumed by existing industries. Ethanol Contracted and Supplies In 2023-24 Supply Year* (in billion litres) — Till September 30, 2024
| Heads | Contracted | Supplied** | Percent of Supplied Against Contracted |
| Total From Grains | 4.33 | 3.34 | 77.1 |
| Total From Sugarcane | 2.83 | 2.51 | 88.7 |
| Grand Total# | 7.17 | 5.85 | 81.6 |
*Note Ethanol Supply Year Runs from November to October **Till September 30, 2024 #Till September 30, 2024
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