While the central government has launched a variety of policy initiatives to market its ambitious ethanol blending programme (EBP) target of reaching 10% blending in petrol by 2022 and 20% blending by 2025, substantial miscalculations by oil advertising firms (OMCs) are threatening to jeopardise the programme.
According to sugar business sources, due to the encouragement and incentives supplied by the government, the sugar mills and distilleries have accomplished a record allocation of 310 crore litres of ethanol to be supplied to OMCs for the 2020-21 ESY, which runs from November to October, as against the prior record of 190 crore litres in 2018-19.
However, owing to slip-ups in developing sufficient tankage, the OMCs have began reallocating contracted quantities from a number of depots, which the distilleries had competed to receive, to faraway depots in other states, which take a number of days to attain, resulting in substantial monetary losses to the distilleries.
In a flurry of letters exchanged among ISMA, the division of meals and public distribution and ministry of petroleum, concern has been raised about distilleries not getting capable to provide a substantial quantity of ethanol as per the contracts that have been signed with the OMCs for ethanol provide year (ESY) 2020-21.
In his letter to secretary Food and Public distribution, director-basic of ISMA, Abinash Verma has red-flagged the situation and stated that the OMCs have began directing the ethanol suppliers from Uttar Pradesh to relocate their supplies to other depots, which in some instances are in faraway states like Tamil Nadu and Orissa, as an alternative of the contracted depots inside the state, which not only take a number of days to attain but also entails an further price on the distilleries.
“What is not clear is how such mistakes in estimating the ethanol requirement for so many depots have been made and that too right at the beginning of the season,” he says, adding that not only is there a challenge of reallocation of depots, the distilleries are also not getting buy orders from OMCs for the proportionate quantity as per contracts. “In several cases, distilleries are facing tremendous problem in the utilisation of their distillery capacities and facing problems of storage of the ethanol,” he stated.
For instance, BPCL’s Kanpur and Mathura depots have not issued indents as per the contracts and have asked the suppliers to shift the quantities to distant areas like Paradeep, even though HPCL’s Meerut and Bahadurgarh depots, immediately after taking 40% and 44% of the supplies respectively, have asked suppliers to shift the remaining quantity to Rajasthan, Chhattisgarh, Jharkhand, West Bengal and Orissa. IOCL’s Miraj depot, as well, had placed its needs on the larger side and is for that reason not issuing buy orders, asking suppliers to shift the quantity from Kolhapur to Rajasthan. “Due to this, several ethanol suppliers are now reluctant to relocate their supplies to such far-flung states”, Verma states.
Responding to the ISMA letter, meals secretary Sudhanshu Pandey has written to the secretary, petroleum and all-natural gas, stating that provided the stiff blending target, removal of these bottlenecks by the OMCs is crucial and asked for essential directions to the concerned OMCs to address the complications getting faced by ethanol suppliers.
“To achieve 10% blending target at pan India level, there is a need to ensure that enough tankage capacity is available with the OMCs,” he says and adds that priority of allocation of inter-state supplies must also be rationalized by OMCs.
Fearing that a substantial quantity of contracted ethanol will not get supplied, Verma says that “we have invested heavily in augmenting ethanol production capacities and would soon be even crossing 10% blending on an average across the country. There is urgent need to augment tankage capacities in all the depots which they have shown interest in their EOIs so that they can lift the entire quantity that has been contracted for,” he writes.
Talking to FE on situation of anonymity, a distiller stated that the present circumstance is a fallout of the higher quantity of contracts for ethanol supplies for which the oil firms have been likely not geared up. “But that should not be an excuse. Because on the one hand, suppliers are legally bound to supply the quantities. If we don’t, we get penalized for the same, but on the other hand, there is no such legal compulsion on the OMCs of any penalty if they do not take supply as per the contracts, which is unfair,” he says, adding that now that the ethanol manufacturing capacity is obtaining created quite speedily, supplies are also growing. “The OMCs need to gear up the supply side by augmenting their tankage capacity, otherwise the whole programme will fall off,” he stated.