The blame has now shifted from public sector oil companies to State governments for hurdles being faced by sugar companies for selling ethanol to oil retailers.
The suppliers say they are ready to meet requirements of oil marketing companies provided State-level issues, including taxation and transportation, are resolved. Taxation on ethanol, a key bio-fuel used for blending in petrol, attracts different rates across States. For example, Maharashtra and Uttar Pradesh impose an export fee of Rs. 1.50 and Rs. 1 a litre respectively. On the other hand, other States impose an import duty.
Fixed price
“There are nitty-gritty issues with the States but a lot of sensitivity has been created due to which ethanol supplies have improved. The fixed price is also giving more stability. Our ethanol blending level is at 3 per cent now,” said B Ashok, Chairman, IndianOil.
He added that the company is now calling for supplies on a monthly basis rather than yearly or six-monthly contracts. “I think we are in the right direction and moving well,” said Ashok.
Net loss
Sugar mill owners say moving ethanol across States causes a net loss. For example, transporting ethanol from Maharashtra to Gujarat causes a net loss of Rs. 4.5 a litre due to the Rs. 1.5 a litre export fee in Maharashtra and the Rs. 3 a litre import duty imposed in Gujarat.
“The movement of ethanol and the unreasonable approach of State governments is the biggest issue. One, the State List under the Constitution clearly states that liquor for human consumption is within that list. Therefore, alcohol not meant for human consumption is not in the State List,” said Abinash Verma, Director General of the Indian Sugar Mills Association.
Obtaining permits for moving bio-fuels such as ethanol is also an issue. “The industry has the capability to fulfil tenders but the issue is if the amount is contracted and then one doesn’t get permissions from the States, then there are heavy penalties which become a disincentive,” Tarun Sawhney, Vice-Chairman and Managing Director, Triveni Engineering & Industries Ltd.
Shortfall
The Ministry for Petroleum and Natural Gas had informed a parliamentary panel that 8.5 crore litres was the total shortfall in ethanol availability as on May 31, 2015. For bio-diesel, the issue is more to do with production capacity. According to the Oil Ministry, India will require 3.5 million tonnes of bio-diesel to achieve 5 per cent blending while availability is only 1 million tonnes.
The Oil Ministry has already begun work to sort out some of these issues. Last week, launching the retail sales of biofuel blended diesel, Minister of State (Independent Charge) for Petroleum & Natural Gas Dharmendra Pradhan said, “We are in talks with States to set up a single tax structure for bio-fuels and if not then at least a fixed bandwidth of taxes for bio-fuels.”