The Cabinet Committee on Economic Affairs yesterday fixed Rs 48.5-49.5 per litre for procurement of ethanol for blending with petrol.
In November 2012, the government had mandated compulsory 5 per cent blending of ethanol in petrol but the programme has not extended beyond certain centres because of supply and pricing issues.
"Linking the ethanol price to the sugarcane price will directly benefit the farmers. Sugar industry is required to pass on 70 per cent of the revenue from primary by-products and, therefore, this move will mean higher revenue to the farmers also," Indian Sugar Mills Association (ISMA) Director General Abinash Verma said in a statement.
ISMA also added that this decision will bring transparency and simplify the procedures to finalise ethanol contracts and supplies thereof.
"5 per cent ethanol blending will save foreign exchange to the tune of 800 million USD equivalent to Rs 5,000 crore," the statement added.
The government also approved that oil companies will sign memorandum with the state governments for a comprehensive system for uninterrupted inter-depot transfer of Ethanol within a State.
"We expect quicker finalisation of contracts between oil companies and sugar manufacturers because of the fixed pricing system and faster and smoother movement of ethanol within and across the States in view of OMCs entering into agreement with the states," Verma added.

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