The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved a mechanism for procurement of ethanol by Oil Marketing Companies (OMCs) and hiked ex-mill price for ethanol derived out of `C` heavy molasses by Rs 3 to Rs 43.70 per litre. Addressing the media here, Union Finance Minster Piyush Goyal said the move will have positive impact on the capability of sugar industry to pay farmers` dues and blending of 10 per cent ethanol with petrol by public sector OMCs to carry out the Ethanol Blended Petrol (EBP) Programme.

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The move will "encourage investment" in the sector which will also bring down imports of petroleum products, he said. 

"We were keen to create more holistic framework in which pricing of ethanol over longer period can be given some stability and credibility. So we can encourage some investment in the ethanol production space," Goyal said.

The EBP programme had started in 2003 but it was languished till 2014, the Minister said. 

"During 2004-14, very small amount of blending took place. After Modi government came in 2014, ethanol supply has increased significantly. In 2013-14, OMCs procured 38 crore litres. It has increased to 140 crore litres in 2017-18," he said. 

"It has helped us in bringing down imports of petroleum products. Also, it has given alternate revenue stream to the sugarcane industry which indirectly goes to support sugarcane farmers."

Goyal said the government had increased ethanol derived out of `C` heavy molasses to Rs 43.70 per litre for the period of December 2018 to November 2019 from the prevailing prices of Rs 40.85 per litre.

Also, the government has fixed Rs 47.49 per litre for ethanol derived from `B` heavy ethanol.

Industry body Indian Sugar Mills Association (ISMA) welcomed the move, saying the industry would respond positively by creating new ethanol production capacities in the next few years. 

"This is a long-term measure which will bear fruits in the medium term and give positive results for the betterment of the sugarcane farmers and sugar producers," a release quoted ISMA Director General Abinash Verma as saying. 

On the decision of fixing higher prices of ethanol for `B` heavy molasses, Verma said: "This innovative step to encourage diversion of `B` heavy molasses and sugarcane juice away from surplus production of sugar into ethanol will go a long way in balancing surplus sugarcane availability in future."

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As the price of ethanol is based on estimated Fair Remunerative Price (FRP) for sugar season 2018-19, it will be modified by the Ministry of Petroleum and Natural Gas as per actual FRP declared by the government.