The Hindu Business Line : Ethanol plan set to gather pace

THE programme to supply ethanol-doped petrol is expected to move forward in the coming weeks, with oil companies calling sugar mills for price negotiations.

This is important for the sugar mills as it will contribute to boosting the prices of alcohol.

According to industry sources, the sugar mills that have bid for supply of ethanol in Tamil Nadu are to meet the oil company representatives later this week. The mills have submitted a bid committing to supply ethanol at Rs 18.75 a litre.

This is the price that the oil companies have agreed on in other States such as Maharashtra and Uttar Pradesh. The meeting is expected primarily to sort out the paperwork and finalise the price.

The sugar mills are keeping their fingers crossed, as the ethanol programme is a crucial issue for them.

It is expected to prove a significant safety net that will support alcohol prices.

Sugar mills in Tamil Nadu are to supply about 1.9 crore litres of ethanol for the programme.

With the sugar season starting for 2005-06, molasses - the by-product of sugar production and raw material for alcohol - will soon build up and alcohol and anhydrous ethanol production will have to start.

This could dampen the prices of alcohol range such as rectified spirit that now costs Rs 19 a litre and extra neutral alcohol, which costs Rs 23-24.

The ethanol programme is a new marketing opportunity that is expected to help sustain prices.

The decision by the oil companies to start the price negotiations has sparked off interest among buyers of alcohol, including potable alcohol manufacturers and industrial users, according to industry sources.

Though sugar mills do not find ethanol prices attractive at Rs 18.75, in the long run the continuation of this programme will prove beneficial. Also the programme is being launched with the supply of five per cent ethanol-doped petrol and in future, the percentage could be stepped up to 10 per cent. This would mean greater offtake of ethanol.

In Tamil Nadu, the programme is expected to continue in a restricted way as the mills are cleared to supply only about 1.9 crore litres of ethanol a year.

This programme is expected to cover seven southern districts, with the mills supplying ethanol to three depots - in Tirunelveli, Tuticorin, and Irugur.

To supply the entire State with petrol containing five per cent ethanol, the sugar mills need to supply about four crore litres.

The anhydrous ethanol production capacity in Tamil Nadu is about five crore litres.

The sugar mills are hoping to get clearance for the entire quantity from the authorities.

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