Almost 13 years after the government first mooted the blending of ethanol with petrol at a 5:95 ratio and endorsed it at various stages, the country is finally set to achieve it in the current marketing year that started on October 1. Sources said oil marketing companies have contracted to buy over 136 crore litres of ethanol in 2015-16, which will be marginally higher than the requirement for 5% ethanol blending with petrol, thanks to persistent nudging by the Prime Minister’s office.
According to an estimate by the Indian Sugar Mills Association (Isma), the blending of over 136 crore litres of ethanol will save the country foreign exchanges of roughly R6,000 crore in the form of a reduction in the net oil import bill to that extent. However, India’s ethanol blending level will still be much lower than that of 25-30% in Brazil, 15% in the US and a whopping 85% being planned by Thailand, according to senior executives of the sugar industry, which is the largest producer of ethanol, a cane by-product.
The sources said 43 producers have offered a quantity of 16.75 crore litres against the third expression of interest opened last week. Earlier this marketing year, almost 120 crore litres were contracted by the OMCs in two EOIs. In 2014-15, the OMCs lifted 67.4 crore litres of ethanol although they had contracted more, and the country achieved 2.5% ethanol blending with petrol.
The government had first proposed the 5% blending of ethanol with petrol in 2003 and made it mandatory in 2007. In December 2013, the Sharad Pawar panel mooted doubling the blending limit to 10%, which was re-iterated by the Cabinet committee on economic affairs in April 2015. In August last year, Prime MinisterNarendra Modi directed ministries concerned to look for ways to make the proposed blending programme a reality soon.
Apart from reducing reliance on oil imports and cutting pollution levels, the decision was also expected to help cash-starved sugar industry improve liquidity so that its cane dues to farmers — a result of a flawed cane pricing policy by states like Uttar Pradesh — could be cleared at the earliest.
Programme resisted by alcohol industry
Despite the proactive steps by the PMO, the blending programme has witnessed resistance from the chemical and potable alcohol industries, which fear a shortage of raw materials.
In response to a recent tweet by the PMO on the “highest-ever production of ethanol as blended fuel” in 2015 benefiting cane farmers, Rakesh Bhartia, president of the Indian Chemical Council, tweeted: “This is the biggest fraud being played on the Indian consumer in the garb of green fuel to benefit sugar.”
When contacted, Bhartia said: “The ethanol-based chemical industry is opposed to the manner in which the ethanol blending policy has been implemented by the government, particularly with regard to the fixing of an exorbitantly high administered price of ethanol, which not just results in the cross-subsidisation of the cane industry by consumers but also deprives the chemical industry of a principal raw material.”
However, Isma director general Abinash Verma said ethanol production and its blending with petrol is being encouraged to achieve the government’s target of cutting oil imports by 10% by 2022. “The price of ethanol has been accordingly fixed by the government for its own oil companies. Being a farmer-friendly government, it’s also trying to ensure the timely payment of remunerative cane prices to farmers by promoting ethanol (a by-product of cane).”
Verma stressed that enough alcohol and ethanol is available for all users “if they are willing to enter into contracts and pay the prevailing market prices”. “Fuel ethanol reduces environmental pollution in a big way. Vested interests should not be allowed to block a national programme, which is beneficial to all citizens, only to serve their personal and selfish motives,” he added.
On charges of over-pricing of ethanol, saying it factors in the costs of transportation to the depots of OMCs, various levies and taxes, and the costs of obtaining all permits. In December 2014, the government had fixed ethanol prices for OMCs (to be delivered at their depots) at R48.50-49.50 per litre, depending on the distance to depots.
According to industry estimates, the chemical industry needs roughly 80 crore litres of molasses, while the potable alcohol industry requires around 130 crore litres a year. OMCs need roughly 133 crore litres to implement the 5% blending programme. The sugar industry says it can produce roughly 280-300 crore litres of ethanol a year at present, which can be ramped up significantly if there
is adequate demand. Sugar industry
executives say roughly a third of raw material demand of chemical and potable alcohol industry is met from sources other than cane.