The Hindu Business Line : Industry expects declared good status for ethanol

The Prime Minister’s Office has also written to the State Governments to remove levy of taxes/fees and barriers for implementation of the programme and enable unrestricted movement of the product within the country.

Richa Mishra

New Delhi, Feb. 27 With the D-day for the Union Budget 2008-09 inching closer, expectations are running high among the stakeholders that the Government may classify ethanol as a declared good which would give the ethanol-blended petrol programme (EBP) an impetus.

Grant of declared good status would ensure a uniform levy on the product across the country.

Demand for declared good status for ethanol is being sought by the Petroleum Ministry which has been supported by other stakeholders. The Government may also consider reduction in the current 16 per cent Central excise duty on ethanol for the programme. According to sources, the Prime Minister’s Office has also written to the State Governments to remove levy of taxes/fees and barriers for implementation of the programme and enable unrestricted movement of the product within the country.

In 2006, the Petroleum Ministry had directed that subject to commercial viability, the oil marketing companies would sell five per cent ethanol-blended petrol as per Bureau of Indian Standards specifications. Sources told Business Line that duty rationalisation is also needed to have price parity between imported ethanol and domestically-procured ethanol. The landed cost of ethanol at Indian ports is about Rs 21 per litre, while the domestic price of ethanol as per the present tender at oil company depot is on an average Rs 28 a litre.

Besides the 16 per cent Central excise duty, sales tax rates varies from State to State. The States also levy various surcharges, export fee (from one state to another), import fee, permit fee, licence fee, administration fee, and State excise. OMCs do not make any profit by selling ethanol-blended petrol. Besides, according to the Petroleum Ministry, OMCs are facing certain constraints with regard to free inter-State movement of ethanol and levy of duties by States.

The total requirement of ethanol by the OMCs for five per cent EBP implementation is 0.600 million kl per year and for 10 per cent EBP implementation it is 1.20 million kl per year for the notified States and Union Territories. The 10 per cent ethanol blending would be mandatory from October this year. The purchase price of ethanol is discovered and finalised by the OMCs through an open tender system. At present, five per cent ethanol blended petrol programme is being implemented in 17 States.

The EBP releases have since commenced at all locations in 15 States and four Union Territories. With this, about 70 per cent of the identified States have been covered. The requirement of ethanol for the three-year period is 180 crore litres; the OMCs have been able to contract 140.4 crore litres. They have procured only 22.6 crore litres under the programme as on January 31.

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