The Hindu Business Line : Gasohol programme may come to a halt in South

Burning issue
Oil companies want ethanol to be supplied at an agreed prices till next tender is finalised.
Sugar mills say if price is hiked in new contract, it must be paid for the ethanol supplied during the interim period.

Chennai , Aug. 11

The gasohol programme in Tamil Nadu and in the other southern States appears to be headed for a break after August, when the current contract period ends for ethanol supply. This is since the oil companies and sugar mills have not been able to agree on ethanol pricing.

Also, molasses, the raw material for distilleries and a by-product in sugar production, which was to be exported, is held up. This could have an implication on environment and revenue for the sugar mills.

Disruption seen

According to sources in the know, the programme to supply ethanol-blended petrol could come to a halt in the South - it never took off on a full scale in the first place. In Andhra Pradesh, the oil companies could not tie-up sufficient ethanol.

In Kerala, no ethanol is available and none of the State Governments in the region is willing to permit mills to spare any and in Karnataka, the oil companies expect some restrictions in supply.

In Tamil Nadu, the State Government has permitted only restricted quantity of ethanol for the programme to be implemented in nine districts.

With current contract period coming to end, the oil companies want the sugar mills to continue supplying ethanol at the agreed prices (the base price is now Rs 18.75 a litre) until the next tender is finalised, which could take a few months.

The sugar mills want a commitment that if the price is hiked in the next tender it would be paid for the ethanol supplied during the interim period.

Molasses piling up

For the sugar mills, molasses, the raw material for ethanol, continues to pile up as the Tamil Nadu Government delays orders allocating the quantity of molasses each sugar mill can export. Molasses prices have hit rock bottom in Tamil Nadu.

There has been an unprecedented quantity of sugarcane crushing in Tamil Nadu. According to industry estimates, the mills here have crushed over 205 lakh tonnes (lt) of sugarcane as of July 31. And some mills continue to crush cane even as the arrivals for the 2007-08 season are expected in a few weeks' time. As an indicator of molasses production, mills would have generated about 9.2 lt of molasses. In the coming season, sugarcane production is expected to touch new highs - at least a 20 per cent growth is expected.

Awaiting export orders

Molasses, traditionally, has been a controlled commodity because of its use as a raw material for alcohol. The Government has restricted movement of molasses outside the State. In a rare move, because the mills had represented that molasses glut was in the offing because of huge sugarcane production the Tamil Nadu Government permitted export of a limited quantity of molasses.

In July-end, the Sate Government granted permission for the private sector mills to export 1.13 lt molasses and the cooperative sector mills to export 51,000 tonnes. But subsequently the next order giving mill-wise quantities for exports is yet to be issued because of which molasses exports have not taken place. With the glut in molasses there are no takers for molasses even at Rs 200 a tonne, just a third of what it fetched a few weeks back.

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