India’s oil-marketing companies to float ethanol global tender valued at Rs3,500 crore

Following the government’s mandatory directive to blend ethanol with petrol, India’s public sector oil marketing firms are preparing to jointly float a global tender to source ethanol valued at Rs3,500 crore (US$650 million). Officials of the three state-run oil-marketing firms, Indian Oil Corp. (IOC), Bharat Petroleum Corp. Ltd. (BPCL) and Hindustan Petroleum Corp. Ltd. (HPCL), and the Oil Ministry will finalize the details of the tender.
Although the pan-India rollout of the 5% ethanol-blended petrol program is already functional in 13 states, the success of the tender is considered important to the program, and could determine its feasibility. From December 1, 2012, the Indian government had postponed the deadline for the nationwide rollout of the program to June 1, 2013.
Since the oil-marketing companies do not have the infrastructure needed to import, store and transport the materials, the tender will involve delivery of the materials to more than 350 depots across the country.
The three firms had floated tenders to procure the necessary quantities of ethanol directly from the world’s biggest producer, Brazil, between 2006 and 2009. However, in 2009, the process changed when the government fixed the price at Rs27 (US$0.50) per liter. Thus, the three companies had to float the Expression of Interest (EoI) for the quantities needed, which led to an improvement in the contracted volumes and supplies.
Although the sourcing process will be back to the pre-2009 period in some ways, blending will prove costly unless the refinery transfer price (RTP), or the price of ethanol is lower than the petrol price paid by the oil-marketing companies to the refineries. IOC’s website indicates that on December 1, 2012, the RTP for BS IV petrol was Rs42.11 (US$0.78) per liter in Delhi based on global gasoline prices and the prevailing exchange rate. (December 13, 2012)