BIEPA Seeks Review of Ethanol Tender Allocation Rules

The Bharat Independent Ethanol Producers Association (BIEPA) has urged the Ministry of Petroleum and Natural Gas and oil marketing companies (OMCs) to review the allocation methodology for the Ethanol Supply Year (ESY) 2026–27 tender, alleging that the existing framework gives Long-Term Offtake Agreement (LTOA) holders two levels of preference that could disadvantage other eligible producers.

The tender covers approximately 1,100 crore litres of ethanol. BIEPA has argued that LTOA holders receive priority for their contracted quantities and an additional preference, on a best-endeavour basis, up to their accepted Expression of Interest (EOI) design capacity. According to the association, this arrangement could leave non-LTOA suppliers with only the remaining quantities, even when they offer ethanol at lower prices.

The association has called for a review before allocations are finalised, arguing that procurement decisions should consider price alongside contractual commitments and ensure equitable opportunities for eligible manufacturers.

BIEPA has also raised concerns about the potential financial implications for OMCs and the public exchequer if higher-priced ethanol is allocated preference over lower-priced supplies that meet the required quality, regulatory and supply conditions.

The association has highlighted differences in the tender prices for ethanol produced from various feedstocks. Maize-based ethanol is priced at INR 68.86 per litre, comprising a base price of INR 66.07 and an incentive of INR 2.79 per litre. Ethanol produced from damaged food grains (DFG) is priced at INR 64 per litre, while ethanol made from surplus rice supplied by the Food Corporation of India (FCI) is priced at INR 60.32 per litre.

BIEPA has questioned whether procurement rules should prioritise suppliers under existing agreements without adequately considering these price differences. It maintains that contractual commitments should not automatically translate into an additional purchasing advantage when other eligible manufacturers can supply ethanol at lower prices.

The association has specifically questioned the first level of preference under Clause 6.2 of the LTOAs, which prioritises allocations to agreement holders for their contracted quantities. While acknowledging the role of long-term agreements in providing offtake assurance, BIEPA has argued that such arrangements should not necessarily justify preferential allocation beyond the commitments involved.

“Long-term agreements were meant to assure quantity on a best-endeavour basis. Where compliant ethanol is available at a lower price, we believe procurement should give it due consideration,” said Pushpinder Singh Mamik, president of BIEPA.

Beyond the contracted quantities, BIEPA has raised concerns over the additional preference provided under Annexure III, Clause B(2)(II)(i)(a), which extends preference to LTOA holders on a best-endeavour basis up to their accepted EOI design capacity.

The association has sought clarification on the contractual basis for extending this preference and on the applicability of Clause 6.8 of the bilateral LTOAs to public procurement. According to BIEPA, Clause 6.8 was not included in the publicly available EOI or tender documents, prompting questions about how the provision is being applied in the allocation process.

“Clause 6.2 already protects the contracted quantity. We seek clarity on why an additional preference should apply beyond these commitments when other eligible producers meet the same quality, regulatory and supply requirements,” Mamik said.

BIEPA has asked the Ministry and OMCs to clarify the relationship between the contractual provisions and the tender's allocation methodology. It has also called for greater transparency in how quantities are distributed among LTOA holders and other eligible suppliers.

The association has warned that the allocation framework could affect the operations and financial viability of independent dedicated ethanol manufacturing plants established in response to the Government's Ethanol Blended Petrol Programme.

Many of these facilities were developed with support from interest-subvention schemes administered by the Department of Food and Public Distribution and financed through substantial bank borrowings. BIEPA has pointed out that environmental approvals for several such plants restrict production to ethanol intended for blending, limiting their ability to divert output to alternative markets if allocations fall short.

According to the association, insufficient procurement allocations could leave these facilities underutilised, reduce revenue generation and make it more difficult for producers to service their loans. The impact could also extend to farmers supplying grain to the plants and rural employment supported by the ethanol manufacturing sector.

“Independent ethanol producers invested in capacity in response to Government policy. Leaving these units with only residual quantities could put their investments and the loans behind them at risk. We seek a level playing field where every eligible producer has a fair opportunity to supply and public procurement delivers value for the public,” Mamik said.

The association has argued that allocation rules should account for the investments made by independent manufacturers while maintaining competition among suppliers that meet the tender's requirements.

BIEPA has urged the Ministry of Petroleum and Natural Gas and OMCs to review the ESY 2026–27 procurement methodology before finalising allocations. Its recommendations include considering price alongside contractual commitments, withdrawing the additional preference or clarifying its contractual basis, and ensuring transparent and equitable allocation among eligible LTOA and non-LTOA suppliers.

The association has also called for disclosure of the financial implications of preferential allocations and amendments to the procurement framework, wherever required, before the process is completed.

BIEPA reiterated its support for the Government's ethanol blending objectives, stating that a competitive and financially sustainable domestic ethanol industry is important for protecting investments made under the programme.

The dispute centres on how OMCs should balance existing offtake commitments with price considerations and equitable access to procurement volumes. BIEPA's concerns focus on whether the additional preference for LTOA holders could limit competition and increase procurement costs, particularly when lower-priced ethanol is available from other eligible manufacturers.