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Ethanol-petrol blending plan grinds to halt

M.R. Subramani

Chennai , Nov. 15

THE ethanol-petrol blending programme has run aground with no meeting point on the prices for ethanol to be offered by oil companies to sugar mills.

"For the time being, the programme has been stalled due to the rigid attitude adopted by oil firms. They are trying to take advantage of the monopoly they enjoy in the domestic market," said sugar industry sources.

When contacted, the Indian Sugar Mills Association Director-General, Mr S.L. Jain, said problems over ethanol price had brought the programme to a halt.

On the other hand, the oil companies say there will no problem in continuing the programme as long as "the cost of ethanol is commercially viable to the oil companies."

The crux of the problem lies in the price quoted for ethanol by the sugar mills and what the oils companies are ready to offer.

"We have quoted Rs 22.80 a litre on a base price of Rs 3,000 a quintal for molasses. The market price for molasses is Rs 4,500 a quintal. Against this, the oil companies are prepared to offer only Rs 20," Mr Jain said.

"We asked the oil firms the reason for the low offer and they say it is based on the landed cost during 2002-03 fiscal. We would be happy if they can take into credit the price during 2002-03 sugar year that runs from October to September," he said.

An IOC official said ethanol prices were determined through tenders, which are finalised considering the commercial viability.

The other bone of contention between the two is the 30 paise per litre excise duty concession given to the oil companies. "It is to offset blending and high procurement cost of ethanol," said the IOC official. The concession has been discontinued since July 1 but the sugar mills say it should have been shared with them.

Last year, the sugar mills received Rs 17.50 a litre but this year the prices are high due to sugarcane production being hit by drought.

The ethanol-petrol programme was introduced by the National Democratic Alliance Government last year to ensure environment-friendly fuel. The programme was introduced in nine States. The oil companies were projected to ensure an assured offtake of five crore litres of ethanol.

Actually, new tenders for ethanol supply should have come into effect in May in Karnataka and Andhra Pradesh and in June in Uttar Pradesh. "The oil companies have cancelled the tenders after accepting our applications," sugar industry sources said, adding that "if rise in crude prices is justified, then increase in molasses prices should also be acceptable to them."

According to Mr Jain, at least four meetings have been held at the highest level on ethanol prices but in vain. "We have also held half a dozen meetings with the joint panel of the oil companies but no progress has been made," he said.

Meanwhile, sugar industry sources say ethanol's use as oxygenate instead of MTBE (methyl tertiary-butyl ether) or ETBE (ethyl tertiary-butyl ether) in fuel was rising since it was found environment friendly. "Studies show that MTBE/ETBE are cancer-causing agents and countries such as the US have cut their use. As a result, ethanol use has double there," they said, adding that ethanol use as oxygenate should be made mandatory in the country.

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