Dec 13, 2006

Ethanol buying picking up

State-run Indian oil refiners have begun buying ethanol from sugar companies in two key states as part of a plan to introduce the biofuel across the country, industry officials said.

Most of the purchases by Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp. and IBP Co. are at 21.50 rupees ($0.50) a litre from northern Uttar Pradesh and southern Tamil Nadu, officials said.

"There are no major problems in the buying process. Only some procedural things are holding up sales from some regions," a senior official at Indian Sugar Mills Association said.

While in some states negotiations were still going on over the price, in others like sugar-deficit Delhi issues such as levies on purchases from sugar-producing states were being worked out.

Indian sugar mills have a production capacity of 1,300 million litres of ethanol annually, enough to feed demand for 1.12 billion litres when the government doubles the blending to 10 percent in petrol, probably from June 2007.

India, the world's second-biggest sugar producer, is likely to produce 2.3 billion litres of ethanol in 2008/09, a trade official said on Wednesday.

He forecast India's sugar output to reach 25.2 million tonnes in the 2008/09 season, up from an estimated 24 million tonnes in 2007/08.

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