Petroleum Minister Murli Deora today said that blending process in the Ethanol Blended Programme (EBP) will commence from November 1.
Deora has asked the oil marketing companies for early implementation of the EBP programme on a national scale.
"The process of procurement of ethanol by oil companies has commenced with the OMCs issuing public notice," the minister said.
Oil marketing companies will have to procure almost 60 crore litres of ethanol for blending with petrol to promote green fuel in the country.
The programme will be implemented in all states except the north east region, Lakshadweep and Andaman and Nicobar Islands.
Petroleum Minister Murli Deora has scrapped the process of buying sugarcane extract at a negotiated price and instead asked the public sector oil marketing companies to call for open tenders.
The official said the open bidding process will remove fears of cartelisation.
Deora had to interfere after ethanol manufacturers sought a price of Rs 27 a litre from oil firms. This was substantially higher than the Rs 18.75 a litre negotiated last year.
The energy equivalent price of ethanol works out to Rs 15.60 a litre, taking one-year peak petrol cost of Rs 26 per litre. The Indian Sugar Manufacturers Association, however, want ethanol price to be linked to global crude.
The official said the Rs 21 per litre price for ethanol was about 35 per cent more than the price for equivalent calorific value fuel.
Ethanol gives 44 per cent lower energy than petrol and as per international practices, like the one followed in the world's largest ethanol-petrol blender Brazil, it should have been priced at roughly 60 per cent of the manufacturing cost.
Earlier, the 5 per cent ethanol blended programme was started in nine sugarcane growing states. However, the project did not make substantial headway due to various reasons including drop in sugarcane production.
The procurement of ethanol from the domestic market would help the sugarcane farmers with better returns and supplement the availability of petroleum products in the country.