New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Tuesday approved a price revision mechanism for state-run oil marketing companies (OMCs), including Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd, and Bharat Petroleum Corp. Ltd, to procure ethanol.

The move comes just months before top cane-producing states Maharashtra and Haryana go to polls.

The CCEA, chaired by Prime Minister Narendra Modi has given its approval for “fixing higher ethanol price derived from different raw materials" under the ethanol blended petrol (EBP) programme for the 2019-20 sugar season during ethanol supply year from 1 December 2019 to 30 November 2020, the government said in a statement.

“Ethanol availability for the EBP programme is expected to increase significantly because of higher prices being offered for procurement of ethanol from all the sugar cane based routes, subsuming partial sugar cane juice route and 100% sugar cane juice route under sugar cane juice route and for the first time allowing sugar and sugar syrup for ethanol production," it said.

The CCEA increased the price of ethanol from ‘C’ heavy and ‘B’ heavy molasses by 29 paise and 1.84 per litre, to 43.75 and 54.27 per litre, respectively. The price of ethanol from sugar cane juice, sugar, and sugar syrup has been fixed at 59.48 per litre.

“A remunerative price for ethanol suppliers will help in reduction of cane farmers’ arrears, in the process contributing to minimizing the difficulty of sugar cane farmers," the government said.

This will also help reduce pollution and strengthen India’s resolve towards fulfilling commitments made at COP-21, the UN Climate Change Conference held in France in 2015. The blending of ethanol in petrol had increased by nearly 300% from 38 crore litres in 2013-14 to around 141 crore litres in 2017-18. The aim is to blend up to 10% ethanol in petrol.

OMCs will procure 260 crore litres of ethanol in 2019-20, petroleum minister Dharmendra Pradhan said on Tuesday. The move will help reduce India’s energy import dependency helping the country save $1 billion in crude oil imports next year, he said.

The national biofuels policy passed by the National Democratic Alliance (NDA) government will help India’s efforts to cut energy imports and carbon emissions. The policy is also aimed at improving farmers’ income and has expanded the scope of raw material for ethanol production to include sugar cane juice, sugar beet, sweet sorghum and starch containing material such as corn, cassava, and damaged grain.

Earlier, the government had announced an export subsidy of 10,448 per metric tonne to mills for the 2019-20 sugar season. Around 6,268 crore of this will be transferred directly to sugarcane farmers. The move was aimed at countering the impact of surplus sugar stock on prices.

Rural distress was a key issue during the Lok Sabha elections. Rural woes are particularly acute in Maharashtra, with flood waters inundating the western part of the state, while a drought-like situation persists in the eastern part. As such, the Bharatiya Janata Party (BJP)-led NDA government is not taking any chances in the run-up to the assembly polls and seeks to connect with the politically sensitive constituency of farmers through various policy measures.

Tuesday’s decision also assumes importance considering that India, the world’s third-largest oil importer, witnessed a 25% year-on-year increase in its oil import bill in FY18 to $109 billion. In March 2015, Modi had set a target of lowering import dependence in oil by 10 percentage points to 67% by 2022.

In July, the Union cabinet had approved the creation of a buffer stock of 4 million tonnes sugar at an estimated cost of 1,674 crore. This was aimed at increasing the wholesale prices of sugar and improving cash flow to sugar mills, which in turn would help mill owners to clear the dues of farmers.

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