The Hindu Business Line : Gasohol dollops being reviewed

IN what could be yet another rollback of a Budget announcement, the Finance Ministry has decided to review its decision to allow the 75 paise per litre surcharge concession on ethanol-doped petrol. The move would hit the sugar industry, but help industrial alcohol-based manufacturers.

The review follows objections raised by the Ministry of Chemicals and Petrochemicals based on representations made by the Indian Chemical Manufacturers' Association whose members include companies such as India Glycols. The Ministry of Chemicals apprehends that the concession given in the 2002-03 Budget would result in the diversion of feedstock from industrial alcohol to gasohol and, in turn, put pressure on prices of industrial alcohol.

"The decision is under review as the Ministry is reworking the extent of concession that needs to be given to promote gasohol," said a senior Finance Ministry official. The ground on which the concession is being reviewed is whether or not to classify gasohol production as an entirely manufacturing activity. To the extent that it is not classified as a manufacturing activity, Modvat credit will not be made available. This in turn will bring down the extent of concession.

In case the entire 100-lakh kilolitres of petrol consumed is doped with alcohol, the revenue loss on this count would be to the tune of Rs 750 crore annually.

The concessional surcharge on ethanol-doped petrol was meant mainly to provide an additional avenue for alcohol consumption, which, in turn, was expected to boost the fortunes of the domestic sugar industry. The latter's margins have been under severe pressure in the last couple of years due to low realisations on sugar as well as molasses. In his 2002-03 Budget, the former Finance Minister, Mr Yashwant Sinha, had imposed a surcharge of Rs 6 per litre on petrol (motor spirit), even while limiting the cess at Rs 5.25 per litre for petrol blended with five per cent ethanol.

Immediately after the Budget, the proposal provoked prompt opposition from leading alcohol-based chemical manufacturer India Glycols Ltd, which claimed that the alcohol produced through the current molasses route was not enough to sustain the `gasohol programme'.

According to it, the country's maximum potential alcohol production through the molasses route at existing levels of sugarcane crushed by mills was less than 1,800 lakh litres.

On the other hand, taking annual domestic consumption of petrol at 100 lakh kilolitres, the alcohol required at five per cent blending of this quantity would be 5,000 lakh litres, which was almost 30 per cent of the potential alcohol production.

Send this article to Friends by E-Mail

Stories in this Section
Monsoon deficient till date — May blow away hopes of economic recovery

Funding carrier pipelines — Petronet may get oil cos to `comfort' FIs

Gasohol dollops being reviewed

Crucial economic Bills to be put on hold

Forget queues; bank online