Bombay HC orders OMCs to procure ethanol quantities from producers

The Aurangabad Bench of Bombay High Court has granted relief to ethanol manufacturers who challenged the government’s order reducing supply mandates to Oil Marketing Companies (OMCs). This means the biofuel makers won’t have to store excess ethanol, and OMCs would be purchasing it from them.

The Case in Question

Sugar factories and other producers filed writ petitions against a government order dated December 7, 2023, which lowered the ethanol supply requirement to OMCs.

The petitioners argued they had expanded their distilleries based on a previous agreement with the government, obligating OMCs to purchase at least 75% of their ethanol production.

HC Observations:

The court recognized the contractual agreements between the petitioners and OMCs, which included arbitration clauses. OMCs were following government instructions to reduce ethanol intake, leaving petitioners with surplus storage issues due to the original contracted quantities.

Ethanol, being flammable, posed a safety risk if not stored properly. The court directed OMCs to receive 75% of the originally contracted quantity until revised quantities were communicated. Once the revised quantities were conveyed, petitioners could supply 100% of them.

The revised quantity was significantly higher (40-50%) than the actual quantity supplied before the government’s order. The court instructed petitioners to maintain date-wise inventory of the biofuel produced under the previous mandate and to file returns in accordance with the court’s directives.