More on ethanol pricing

NEW DELHI: The contentious issue of ethanol pricing could be back on the drawing board again despite a ministerial panel endorsing a Rs 27 per litre

price only last week. And sugar companies may have to refund extra payment made by oil marketing companies, if an expert panel constituted to look into the issue suggests a lower price.



“The price of Rs 27 per litre would be purely interim in nature and subject to adjustment with respect to the final price,” the minutes of the July 26 meeting of the group of ministers (GoM) says.
Source http://economictimes.indiatimes.com/news/economy/policy/Ethanol-price-not-final-panel-to-suggest-formula/articleshow/6254570.cms


The petroleum ministry has been directed by the GoM, headed by finance minister, to submit a fresh proposal on the issue.



The expert panel, mooted several months ago, was officially constituted through a memo only on July 19. The panel, headed by Planning Commission member Saumitra Chaudhury, will deliberate on a “fair and remunerative” price for the commodity. The panel’s terms of reference will be suitably amended to incorporate last week’s GoM decision. It is expected to start deliberations after the interim price is officially notified.



The expert panel will propose ethanol price based on a formula/ principle that is “transparent” and takes into account “the dynamics of pricing of sugarcane and petroleum products, so that it could be applied in the future as well,” the minutes of GoM meet adds.



The decision to suggest only an interim price for ethanol could be because of the differences between the food, chemicals and petroleum ministers. In May, food minister Sharad Pawar had pre-empted the expert panel on ethanol price by saying that while the current price of `27 per litre was already approved by the GoM at its April meeting, a subsequent “fair” price, to be decided by the Chaudhury panel, could be lower than `26 per litre. However, he had not made any mention of the possible refund by sugar companies to oil companies.



This suggests that the second meeting of the GoM on ethanol on the implementation of the ethanol blending programme (EBP) on July 26, has, in fact, modified its own earlier price decision in April. The GoM, at the second meeting, said that after detailed deliberations of the agenda circulated by the petroleum and natural gas ministry (MoP&NG), it was decided to amend the price decision of the April GoM meet. Accordingly, `27 per litre would be “till such time as the final price based on formula/ principles as recommended by the expert committee is approved by ‘the competent authority’.”



Apart from finance minister Pranab Mukherjee, and Mr Pawar, the other members of the GoM are heavy industries minister Vilasrao Deshmukh, petroleum minister Murli Deora, new and renewable energy minister Farooq Abdullah and chemicals and fertlisers minister M K Azhagiri. Mr Pawar, Mr Deshmukh and Mr Deora are from Maharashtra, the state which produces the highest quantity of sugar in the country.