Government to Begin Purchase of Maize from Farmers by Distillers at Guaranteed Price

The Indian government has introduced a standard operating procedure (SoP) for its scheme, under which cooperatives such as NAFED and NCCF will enter into agreements with distillers for the guaranteed supply of maize at ₹2,291 per quintal for the production of ethanol.

This initiative aims to ensure the minimum support price (MSP) to maize farmers, while providing distilleries with a secure and uninterrupted feedstock supply, thereby reducing price volatility for both parties. The first agreement under this scheme is expected to be signed between a distiller in Chhindwara, Madhya Pradesh, and NAFED on Monday.

The government’s goal is to increase the blending of ethanol with petrol, which stood at 12 per cent in the Ethanol Supply Year (ESY) 2022-23 and targets 15 per cent in ESY 2023-24. This move is part of the broader strategy to promote biofuels, increase farmers’ income, and reduce the import bill on crude oil, which amounts to over $157 billion in FY23.

Under the SoP, NAFED and NCCF will engage in supply contracts with distillers, covering pricing, quantity, location of supply, and other commercial terms and conditions for the ESY.

The price of maize for ESY 2023-24 has been fixed at ₹2,291 per quintal, inclusive of all procurement costs and agency margins. Furthermore, to motivate farmers to participate, cooperatives will register farmers and coordinate with distilleries to meet the demand for maize.

With the looming target of achieving 20 per cent ethanol blending with petrol by 2025, the government is prioritizing the use of maize as a feedstock for ethanol production. This is especially important as the production of sugarcane is expected to be affected, prompting the government to focus on increasing maize production.

To support this initiative, public sector oil marketing companies (OMCs) have announced an incentive of ₹5.79 per litre (excluding GST) for ethanol sourced from maize, increasing the price to ₹71.86 per litre for ESY 2023-24.

Overall, this scheme demonstrates the government’s commitment to promoting sustainable energy sources, supporting farmers, and reducing dependency on imported crude oil, marking a significant step forward in India’s energy and agricultural sectors.

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