The All India Distillers’ Association (AIDA) has written a letter to Indian Oil Corporation Ltd. (IOCL) requesting the OMCs to release the penalty under the Price Reduction Clause (PRC) and security deposit amount to Premier Alcobev Pvt. Ltd. and Shamanur Sugars Limited, both members of the Association, due to the cancellation of FCI rice supplies for ethanol production. In the tender document, OMCs have been given a right to raise the penalty under the PRC, if the supplies are less than 80% in a month or 95% in a quarter whichever is higher.
The letter says that both companies are facing serious financial constraints due to this, they are requesting immediate release of the security deposit amounts, enabling them to continue production and supply, according to the schedule.
Earlier, Premier Alcobev Pvt. Ltd. had written a letter to HPCL demanding the release of PRC for non-supply of ethanol in ESY 2022-23 due to the abrupt cancellation of FCI rice. This was written in response to a letter from HPCL which was directed to collect applicable PRC for ESY 2022-23. It said that once the PRC amount is collected, then Bank Guarantees would be released for the season.
In another letter by Shamanur Sugars Limited to BPCL, the company said that for ESY 2022-23, it had to convert the feedstock for the production of ethanol from FCI rice to maize for ESY 2022-23. “The LOI was issued to us on 04/07/2023 and agreements were submitted on 10/7/2023 for the supply of ethanol from FCI rice. Further, they got confirmation from FCI Regional/HQ on 30th July 2023 that FCI will not be able to supply rice for ethanol production. We have immediately informed OMC Head Offices, Regional Offices & Locations that the change in feedstock would be done based on the availability of DFG and Maize for production of ethanol”, the letter said.
The letter mentioned that due to the non-supply of rice from FCI, the cost of broken rice & maize increased drastically. Moreover, due to the drought like situation in Karnataka resulting in a shortfall in raw material, the company was unable to supply the balance ethanol in ESY 2022-23.
The Government in July 2023 cancelled the supply of FCI rice to grain-based distilleries for ethanol production after it banned the export of non-basmati rice. Experts viewed it as a measure to ensure sufficient supply of FCI rice in the domestic market.
