* IOC, HPCL & BPCL buy 720 mln litres of ethanol from sugar
* Blending target of 5 pct to be hit for first time ever
* Cash-strapped sugar mills see ethanol sales boosting
By Rajendra Jadhav
MUMBAI, Feb 17 Indian oil marketing companies
(OMCs) have bought a record 720 million litres of ethanol from
the country's cash-strapped sugar mills for blending, in an
attempt to curb fossil fuel imports, industry officials said.
The purchases would help the OMCs hit a government-mandated
goal of 5 percent blending of ethanol in gasoline for the first
time in 2013/14 since its introduction seven years ago and lift
earnings at indebted mills in the world's No.2 sugar producer.
With the 5 percent blending, New Delhi could save around $1
billion on annual imports of crude, the Indian Sugar Mills
"OMCs have bought in total 720 million litres of ethanol,"
Ravi Gupta, president at Shree Renuka Sugars Ltd, the
country's top sugar refiner, told Reuters.
"Their requirement is 1.05 billion litres per year and we
hope they shall continue to come out with new tenders."
Disagreements between sugar mills and oil companies over
pricing stymied progress after India launched its ambitious
ethanol blending programme in 2006, trying to emulate the
success of Brazil's booming biofuel industry.
New Delhi is scrambling for ways to cut nearly $20 billion
off its oil costs as it battles a high current account deficit.
Three state-run oil marketing companies - Indian Oil Corp
Ltd, Hindustan Petroleum Corp and Bharat
Petroleum Corp - have lifted 230 million litres
ethanol out of the contracted 720 million litres, Gupta said.
That is good news for mills that have been struggling with
low sugar prices due to a surplus in production of the sweetener
for the fourth straight year.
"Ethanol generates an additional source of revenue for cash-
starved sugar mills. It helps everyone in the industry -
farmers, producers, consumers," Gupta said.
SMOOTHER EXECUTION SEEN
Indian mills produce ethanol from molasses, a byproduct of
Ethanol prices were varied in different regions, but roughly
the OMCs paid around 35 to 37 Indian rupees ($0.56-$0.60) per
litre ex-distillery price for the biofuel, said an official with
the Maharashtra State Cooperative Sugar Factories Federation.
"Since all preparations are done for the ethanol blending
programme, from next year execution would be much smoother,"
said a Mumbai-based official with a leading OMC, who declined to
Sugar industry officials believe the blending can be raised
to 10 percent as enough ethanol supplies are available due to a
rise in sugar production.
"Achieving 10 percent blending is not a difficult task. The
government needs to just tweak the policy. Industry can ensure
implementation," said a sugar miller based in Maharashtra.
($1 = 62.0900 Indian rupees)
(Editing by Muralikumar Anantharaman)