PUNE: Despite the huge capacity of sugar factories to supply ethanol to oil companies at affordable rates, the Union government has not taken any decision on blending ethanol with petrol, which would reduce the oil import bill.

Claiming that ethanol can be blended with diesel also, the Indian Sugar Mills Association, the national body of sugar factories, has reiterated its demand for ethanol-blending following the recent increase in fuel prices.

The Karnataka government has started blending of five per cent ethanol with diesel used by state transport buses. The Union government should convince the stakeholders and do the same, the association representatives said.

Ethanol is a type of alcohol. If blended with petrol or diesel, it enhances the performance of the vehicle and brings down the CO2 emission. It is made from molasses, a bi-product of crushed sugarcane. Ethanol, industrial alcohol and potable alcohol are the three major products obtained from molasses.

Abinash Verma, director general of the Indian Sugar Mills Association (ISMA), told TOI: "If five per cent ethanol is blended with one litre of petrol, it saves Rs 15 per litre. The annual requirement for five per cent blending with petrol across the country is 100 crore litre of ethanol. This will result in a saving of at least Rs 1,500 crore every year." Though the Union cabinet has decided in October 2007 to initiate blending of ethanol with petrol across the country, the decision has never been implemented, said Verma.

Last week, a meeting was held in Delhi to discuss the blending of ethanol with petrol. Union finance minister P Chidambaram, Union agriculture minister Sharad Pawar, Union minister for food and civil supplies C V Thomas and various stakeholders from chemical and petroleum ministries attended the meeting. However, no decision was taken in the meeting as representatives of chemical sector objected to the blending, fearing that their requirement of ethanol would be compromised.

Ethanol India, a group of consultants and experts, is also working with the government and other stakeholders on implementation of ethanol-blending.

Deepak Desai, chief consultant at Ethanol India, said: "The current market price for industrial alcohol is Rs 35 per litre. But the government is not keen to increase ethanol price above Rs 31 per litre. The low price discourages sugar factories and distilleries from producing ethanol. So, they prefer to produce industrial and potable alcohol."

The price mechanism has to be competitive. Since the average petrol price in the country is above Rs 65, the oil companies and the government will still manage to save lot of money even if ethanol is priced at Rs 40 per litre, he added.

Desai also said that there was no effort from the government to set up a system to ensure good production of sugarcane, its supply to factories, crushing, production of molasses, its supply to distilleries and production of ethanol.

Verma said the yearly requirement of potable alcohol and industrial alcohol in the country is 90 crore litre and 75 crore litre respectively.

With five per cent blending, the requirement of ethanol is 100 crore litre. The sugar factories can produce 280 crore litre alcohol annually. We have many a times submitted the figures of consumption and supply of petrol and ethanol but the government is delaying a decision on blending, he added.