Why ethanol is yet to blend with petrol

New Delhi, Eleven years since the Government launched the ethanol-blended petrol (EBP) programme, pricing remains the biggest spoiler.

The programme, according to which five per cent ethanol had to be blended with petrol, in order to reduce pollution and boost agriculture sector, has also suffered from bureaucratic hurdles.

“EBP still hasn't taken off in a big way due to inconsistent availability of ethanol, restrictions, and complex as well as differential tax structures of the States,” an oil industry official said.

In fact, as against the industry demand of 101.66 crore litre for October 2011-September 2012, the oil marketing companies (OMCs) received offer for only 60.74 crore litre from the sugar industry – just 60 per cent.

Ms Rajshree Pathy, Chairman and Managing Director, Rajshree Sugar & Chemicals Ltd, said that the Government should fix a pricing policy for a year instead of the current tendering method.

Currently, the public sector OMCs procure ethanol on an ad hoc uniform ex-factory price of Rs 27 a litre throughout the country. A tender is floated and the sugar mills compete with each other.

“They (Government) should fix it at whatever rate – Rs 28 or Rs 32/litre on an annual basis. Every three months you cannot be floating a tender asking the sugar industry to compete…why don't they mandate that sugar industry has to supply so many litres of ethanol at a fixed price,” she said adding that this will also ensure that the sugar mills know their commitment.

The OMCs had floated expression of interests (EoI) for 2011-12 for 20 States and four Union Territories. There was no offer for Jharkhand, West Bengal, Odisha, Chhattisgarh and Tamil Nadu.

Allocation on least cost basis has been completed, the industry source said, adding that letter of intent has been issued to suppliers for Punjab, Haryana, Delhi, Uttar Pradesh, Uttarakhand, Bihar, Gujarat, Maharashtra, Goa, Andhra Pradesh, Karnataka and Kerala.

On their part, the OMCs cite non issuance of export permit by the Uttar Pradesh Government for supply to Delhi, Haryana, and Uttarakhand, non issuance of no objection certificates by the Excise Departments of Bihar and Kerala, and lesser supply in other States as the reason for low procurement.

To the EoI for September 2010-11, the total ethanol quantity offered was 101.30 crore litre, out of which 31.01 crore litre was offered by the 53 parties who were disqualified.

The remaining qualified parties had offered 70.29 crore litre against one year projected requirement of 104.91 crore litre by the OMCs, an industry official said.

Finally, letter of interest was issued for 68.33 crore litre and formalities of agreement, security deposit completed for the quantity of 57.59 crore litre. Based on least cost at the depot/terminal locations, 55.86 crore litre ethanol was allocated for 12 States.

source: thehindubusinessline