An ethanol blending agreement is the formal commercial contract that connects ethanol producers with India’s public-sector Oil Marketing Companies (OMCs)—Indian Oil, Bharat Petroleum, and Hindustan Petroleum. This agreement defines how ethanol will be supplied, at what price, to which depot, in what quantity, and with what compliance framework.
Unlike private-sector supply contracts, the ethanol blending agreement is tightly standardized because it is governed by the national Ethanol Blending Programme (EBP). This makes it predictable but also highly regulated.
This agreement ultimately determines the producer’s operational, financial, and compliance responsibilities.
The EBP aims to blend ethanol into petrol to reduce crude oil imports, support the sugar sector, and promote biofuels. India has set an ambitious target to achieve 20% blending by 2025, which has significantly increased the demand for ethanol from distilleries across the country.
Understanding this cycle helps manufacturers plan capacity, feedstock procurement, and working capital.
India recognizes several types of ethanol for blending, each associated with unique production economics, risk profiles, and profitability margins.
| Feedstock | Yield (L/Tonne) | ESY Price (₹/Litre) | Business Decision Insight |
|---|---|---|---|
| C-Heavy Molasses | 240–260 | Lower tier | Suitable for mills looking to dispose molasses efficiently |
| B-Heavy Molasses | 290–310 | Mid-tier | Balanced choice offering better profitability |
| Juice/Syrup | 600–650 | Highest | Requires high-input investment but gives superior returns |
| DFG | 375–400 | Variable | Depends on market cycles; margin-sensitive |
| Maize | 410–430 | Competitive | Strategic long-term feedstock for grain plants |
Business Interpretation:
Higher feedstock purity and conversion efficiency translate into stronger contract profitability.
The procurement process is uniform nationwide, but the operational implications vary based on infrastructure, feedstock, and region.
Tender Submission:
Producers bid for quantities they can supply across specific depots or regions. Bids are submitted online through the unified OMC portal.
Technical Evaluation:
Capacity, feedstock source, past performance (if applicable), and compliance readiness are evaluated.
Quantity Allocation:
Based on national demand and proximity to depots.
Letter of Intent (LOI):
Issued once the bid is accepted. LOI specifies preliminary allocation and responsibilities.
Contract Signing:
The ethanol blending agreement formalizes obligations. It includes depot allocation, quantity slabs, payment terms, penalty clauses, and compliance conditions.
Supply Execution:
Producers dispatch ethanol as per monthly schedules. OMCs release payments following depot acceptance.
Case Study: Western Biofuels Ltd. (Fictional Representation)
Western Biofuels Ltd., a 300 KLPD distillery in Maharashtra, expanded capacity in 2022 aiming to become a major supplier under the EBP programme. Their initial challenge was accessing reliable and government-backed demand to stabilize cash flow.
The company analyzed:
They bid for 55,000 KL annually spread across four depots within a 250 km radius.
Upon winning the tender, the company was issued an LOI for the full bid volume. The ethanol blending agreement required them to:
Western Biofuels created an internal contract compliance team for this purpose.
During the first four months, supplies were smooth. However, monsoon disruptions caused tanker delays, risking penalties.
The company responded by:
Despite initial setbacks, they achieved:
Key Takeaway:
Contract success depends less on ethanol production and more on logistics, documentation, and real-time supply monitoring.
The pricing mechanism is central to profitability for any distillery. Unlike most commodities, ethanol for EBP has a fixed government-notified price, which eliminates market risk.
| Component | Included? | Notes |
|---|---|---|
| Base Ex-Mill Price | Yes | Varies by feedstock type |
| Denaturant Cost | Yes | Typically up to 2% |
| GST | Yes | Adds to invoiced amount |
| Freight Reimbursement | Separate | Based on distance slabs |
| Handling Charges | Yes | Added to depot billing |
| Testing Charges | Sometimes | Depends on depot policy |
Business Insight:
Actual margin depends on production efficiency and freight optimization, not just the notified price.
Ethanol supply requires a fully integrated chain of approvals, logistics, and cross-verification.
Case Study: Eastern Green Fuels Pvt. Ltd. (Fictional Representation)
This grain-based distillery in Bihar secured 32,000 KL supply allocation for an ESY. While they had sufficient grain and production capacity, logistics planning was underestimated.
Lesson:
In ethanol agreements, logistics mismanagement can cost crores—even if production is perfectly on schedule.
Compliance is a central binding factor in ethanol blending agreements. It protects both the producer and the OMC.
Regulatory Requirements
Excise Requirements
Quality Requirements
Documentation Requirements
Failure in any segment leads to depot rejection and financial setbacks.
Producers often underestimate the binding nature of OMC agreements.
A structured strategy improves approval rates, supply compliance, and long-term growth.
Adopting these practices enhances operational consistency and improves tender credibility.
The ethanol blending agreement is more than a contract—it’s a complete operational blueprint for supply, pricing, compliance, and logistics. Producers who understand the deeper mechanics of tendering, quality control, excise regulation, and transport planning are more likely to perform successfully and secure larger allocations year after year.
With India pushing aggressively toward 20% blending, distilleries that align early with expectations of OMCs will unlock significant long-term revenue and growth opportunities.
For expert help with ethanol tenders, compliance, regulatory approvals, and ethanol blending agreements:
📞 +91 78350 06182
📧 wecare@greenpermits.in
An ethanol blending agreement is the formal contract signed between an ethanol producer and an Oil Marketing Company (OMC). It outlines the quantity to be supplied, depot allocation, pricing, delivery schedule, quality parameters, penalties, and all regulatory requirements for the supply year.
Any distillery, sugar mill, or grain-based ethanol plant eligible to participate in the EBP tender can sign the agreement. The producer must hold valid environmental permissions, excise licenses, and meet minimum production and storage requirements.
Quantity allocation is based on multiple factors—production capacity, feedstock availability, distance to depots, past performance, and tender competitiveness. Producers closer to depots usually receive higher allocations due to lower logistics costs.
No. Ethanol prices under the EBP programme are fixed by the Government of India for each feedstock category. Producers cannot negotiate the ex-mill price with OMCs.
