OMCs Set to Float 3,500-cr Global Tender for Ethanol

Public sector oil marketing firms are readying to jointly float a . 3,500-crore global tender to source ethanol, which will have to be mandatorily blended with petrol sold across the country following the government’s directive. Officials of Indian Oil, BPCL and HPCL, the three state-run oil marketing firms, and the oil ministry will be meeting over the next few days to finalise the details of the tender, a person familiar with the matter told ET, adding that the industry will need about 1,000-1,100 million litres of ethanol a year.
The success of the tender is expected to determine the feasibility of the pan-India rollout of the 5% ethanol-blended petrol programme, which is already functional in 13 states. The government had postponed the deadline for the nationwide roll-out of the programme to June 1, 2013 from December 1, 2012.
Since the oil marketing companies are not in a position to take care of the infrastructure needed to import, store and transport the material, the tender will involve delivery at their depots numbering more than 350 across the country. 
Hindustan Petroleum had, through its wholly-owned subsidiary HPCL Biofuels, acquired two sugar mills in Bihar that it revived in the previous fiscal. These units can supply nearly 32.5 million litres, about 10-12% of the company’s annual ethanol requirement.
The three firms had attempted to source ethanol directly from the world’s biggest producer, Brazil, in 2006, when the blending programme was introduced subject to commercial viability. Between 2006 and 2009, these companies floated tenders to procure the necessary quantities of ethanol. “Our experience during those three years was that the contracted volumes were always lower than the requirement and the actual supplies would fall short of the contracted volumes,” said an official, who did not wish to be named. In 2009, the process changed with the government fixing the price at . 27 per litre. These companies had to float EoI for the quantities needed, which led to an improvement in the contracted volumes and supplies.