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Deora asks oil cos to adopt tendering route for ethanol

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`Adopt open bidding through which all prospective suppliers can participate'

New Delhi , Aug. 31

The Petroleum Minister, Mr Murli Deora, has asked state-owned oil marketing companies (OMC) to float for open tenders for purchase of ethanol instead of the present negotiated price route for the 5 per cent blended petrol programme.

According to sources, the Petroleum Minister felt the negotiated purchase mechanism between the oil companies and the sugar industry as a whole was not transparent. It was also leading to allegations and counter allegations between the two sides.

Sources told Business Line that the Minister has directed the OMCs to adopt open bidding through which all prospective suppliers could participate and price discovery achieved in an open and fair manner.

Sugar mills have been seeking a uniform ex-distillery price of Rs 27 a litre, against the Rs 18.75 a litre rate negotiated last year. The OMCs, in turn, are said to be offering no more than Rs 21 and demanding pricing based on the calorific value of ethanol.

Need for 58 cr l ethanol

As per estimates, oil firms need 58 crore litre of ethanol annually for selling five per cent ethanol blended petrol in nine States. The marketing companies have been directed to put out a clear tender in the market and have been given the complete commercial freedom to protect their commercial interests in arriving at workable ethanol pricing, sources added.

Ethanol gives 44 per cent lower energy than petrol and as per international practices, like the one followed in Brazil, it should have been priced at roughly 60 per cent of the manufacturing cost. The energy equivalent price of ethanol works out to Rs 15.60 a litre taking one-year peak petrol cost of Rs 26 per litre. However, Indian Sugar Manufacturers Association (ISMA) wanted ethanol price to be linked to international oil prices.

Related Stories:
`Ethanol-blended petrol sale subject to availability'
Meet on pricing of ethanol next week
Sugar coops to supply ethanol to oil PSUs

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