Indian oil firms to compensate ethanol makers for higher energy costs

NEW DELHI/MUMBAI (Reuters) - Indian state fuel retailers have agreed to provide monetary relief to sugar mills and other producers of ethanol to compensate for high energy costs to boost biofuel production, according to a letter written by the companies to manufacturers.

India, the world's third biggest oil importer and consumer, has expedited efforts to double ethanol blending with gasoline to 20% from the current 10% across the country from 2025/26.

The Indian government fixes the ethanol purchase prices for fuel retailers - Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp -- every marketing year.

However, the fuel retailers have announced they will pay extra to ethanol manufacturers to compensate for high energy and power costs, a BPCL spokesman said.

The three state fuel retailers have announced the 'relief scheme' for June 1 to Nov. 30.

The companies will pay an additional 1,604 rupees ($20.62) per kilolitre for ethanol produced from sugar cane juice, and 1,493 rupees for B- heavy molasses and 1,179 rupees for ethanol produced from C-heavy molasses, the letter showed.

The B-heavy molasses juice has some sucrose content left in them for sugar production, whereas C-heavy molasses is a cane by-product that has no sugar content left in it.

For a kilolitre of ethanol produced from damaged foodgrains and rice, the relief is fixed at 2,337 rupees and 1,437 rupees, the letter showed.

Prime Minister Narendra Modi has pledged to achieve net-zero carbon emissions by 2070, and is encouraging industries to switch to cleaner options including renewable and biofuels to cut carbon footprint.

($1 = 77.7980 Indian rupees)

(Reporting by Nidhi Verma and Rajendra Jadhav; Editing by Kim Coghill)