India to implement E5 mandate, approves price mechanism

By Erin Voegele | November 26, 2012

According to a release issued by India’s Press Information Bureau, the country’s Cabinet Committee on Economic Affairs has approved a pricing formula for ethanol procurement by oil marketing companies for use under its E5 blending mandate.

The statement noted that the E5 mandate has already been approved by the CCEA, and should be implemented nationwide. According to the release, the Ministry of Petroleum & Natural Gas will immediately issue a notification for oil marketing companies to implement the mandate in the 2012-’13 sugar season, effective Dec. 1.

Information published by the Indian government specifies that the procurement price will be decided between the oil marketing companies and ethanol suppliers. In the event of a domestic supply shortage, the oil marketing companies and chemical companies are free to import ethanol from other regions of the world.

While the blending mandate is currently being implemented in 13 Indian stats at an E2 level, the CCEA said in its statement that all states are expected to comply with the E5 blending mandate.

According to the release, a stable ethanol blending mandate will benefit India’s sugarcane farmers by ensuring a market for bumper crops, and is expected to incentivize small and medium farming operations to grow the crop.

Regarding the decision to allow the market to set ethanol prices, the Indian government said that the pricing mechanism will ensure stability. The government also noted that blending program will help reduce India’s dependence on foreign oil.

According to a USDA Global Agricultural Information Network report on the Indian biofuels market filed earlier this year, the country’s National Biofuel Policy calls for the replacement of 20 percent petroleum-based fuels with biofuels by 2016-’17. As of June, the total ethanol supply in the country was estimated to be just sufficient for E2 blending. However, the report also noted that a strong outlook for the sugar market could lead the Indian government to renew its focus on the E5 mandate.

A separate GAIN report published in October that is focused on India’s sugar production reported that sugarcane plantings in marketing year 2012-’13 are unchanged from last year, with 5.1 million hectares (12.6 million acres) planted. Sugar production, however, is expected to drop 6 percent compared to last year, to 335 million tons.