State-owned fuel companies have agreed to provide monetary relief to sugar mills and other ethanol producers to compensate for high energy costs to boost biofuel production, according to a letter written by the companies to manufacturers, reported Reuters.

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India is the world’s third-biggest importer and consumer of oil. It has accelerated efforts to double ethanol blending with gasoline to 20% from the current 10% across the country from 2025- 26. This holds significance as every dollar increase in the price of crude oil raises India’s import bill by Rs 10,700 crore on an annual basis. India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19.

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

According to a Reuters report, the fuel retailers have announced that they will pay extra to ethanol manufacturers to compensate for high energy and power costs.

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The three public fuel retailers have announced the ‘relief scheme’ from June 1 to November 20.

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

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The B-heavy molasses juice has some sucrose content left in it for sugar production, whereas C-heavy molasses is a cane by-product without any sugar content left in it.

For one kilolitre of ethanol produced from damaged foodgrains and rice, the compensation is fixed at Rs 2,337 and Rs 1,437, the letter showed.

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Prime Minister Narendra Modi has pledged to achieve net-zero carbon emission by 2070 and is encouraging industries to shift to cleaner energy options such as renewable and biofuels to reduce carbon footprint.