The Hindu Business Line : Petrol blending: Decision on ethanol pricing by August end

For supplying 5% blended petrol in 10 States and four union territories, 3.77-lakh kilolitres of ethanol would be required by oil companies Oil companies seek rationalisation of prices, regular supply

Mumbai , Aug. 5

The Union Government is set to take a decision on the price of ethanol required for petrol blending by the end of August, even as the differences on ethanol pricing among the buyers and sellers remain unchanged.

Sources said that joint meetings have been scheduled between the Ministry of Petroleum & Natural Gas, the Ministry of Agriculture, oil public sector companies and the associations of sugar manufactures to thrash out theprice issue.

Ethanol Sourcing

The first of these will probably be held next week. October 1, 2006 is the deadline for implementing 5 per cent blended petrol across 10 States and four Union Territories. For supplying 5 per cent blended petrol in these areas, 3.77 lakh kilolitres of ethanol would be required by oil companies.

For each region in the country, a major public sector oil company has assigned the task of sourcing ethanol through public tenders. Indian Oil Corporation is handling the sourcing of ethanol from North India, Hindustan Petroleum Corporation from Western India and Bharat Petroleum Corporation from South India. They have set Rs 18.75 per litre of ethanol as the benchmark price, around which the price negotiations will rally.

Mr R.K. Mehra, General Manager (Logistics), Bharat Petroleum Corporation Ltd(BPCL), said that the infrastructure for blending, handling and distribution of ethanol-blended petrol was in place for which Rs 15 crore had been utilised and another Rs 15 crore sanctioned. "Our basic problem is not the supply and distribution of ethanol but sustained availability over a long period. We also want rationalisation in ethanol prices," he said. "To ensure sustained availability of ethanol we plan to introduce `take-or-pay clause' in our new agreements with our suppliers."

Old Price

"Every State has different duties on ethanol, therefore, there is no uniformity in cost. State Government bodies in certain States also delay the process of licences for storage. We want rationalisation of prices and hurdle-free operations," Mr Mehra said.

Arriving at a price for ethanol would be tough task given the complexity of the issue. However, due to steady rise in crude prices and its cascading effect on economy, the Government would be forced to take a call.

The benchmark price of Rs 18.75 per litre is unacceptable to ethanol producers. "It is an old price offered to us when crude oil was at $35 a barrel, today it is over $75. We want price discovery formula to be based on costs incurred by us on our raw materials like molasses and rectified sprit. We want our price to be around Rs 27.83 per litre" Mr Prakash Naiknavare, Managing Director, Maharashtra State Co-operative Sugar Factories Federation, said.

Policy Issues

Once the price is finalised all other policy issues relating to ethanol would be resolved, he said, adding that good prices would also guarantee continuous supply.

Maharashtra is fully geared up for petrol blending, according to Mr Naiknavare. The State controls almost one-third of the sugar production and one-fourth of ethanol production in the country.

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