The Hindu Business Line : `Feel-good factor' spills over to sugar industry — Surcharge sop on ethanol for petrol extended

Industry & Economy - Petroleum
Agri-Biz & Commodities - Sugar

`Feel-good factor' spills over to sugar industry — Surcharge sop on ethanol for petrol extended

K.R. Srivtas
Harish Damodaran

New Delhi , Feb. 5

IN yet another `feel-good factor' measure, this time aimed at the ailing sugar industry, the Finance Ministry has extended the 30-paise per litre surcharge concession on petrol used for blending with ethanol for a period of four months up to June 30.

At present, besides a 16-per cent basic excise duty, a 14-per cent special excise duty and a Rs 1.5-per litre additional excise duty, petrol (motor spirit) also attracts a special additional duty of excise or `surcharge' of Rs 6 per litre. But for petrol that is used to manufacture `gasohol' — i.e. petrol with 5 per cent ethanol content — the surcharge is limited to Rs 5.70 per litre.

At the same time, this 30 paise lower surcharge was subject to a sunset clause, with a Revenue Department notification, dated March 1, 2003, stating that this concession was valid only up to February 29, 2004.

But now, the department has extended the validity period for a further four months up to June 30 through a fresh notification issued on Wednesday. Interestingly, the Finance Minister, Mr Jaswant Singh, did not make a mention about this sop in his reply to the debate on the 2004-05 Interim Budget in the Lok Sabha on the same day.

Ethanol or anhydrous alcohol is basically alcohol of around 99.8 per cent purity against ordinary rectified spirit (used for industrial or potable purposes) that has alcohol content of 94 per cent to 95 per cent. Many sugar mills have over the last couple of years installed latest distillation facilities to manufacture ethanol — which fetches higher prices relative to rectified spirit — in order to offset the impact of low realisations from sugar.

As a promotional measure, the 2002-03 Union Budget had proposed that 5 per cent ethanol admixtured petrol be levied a surcharge of only Rs 5.25 per litre against Rs 6 per litre for normal petrol.

Further, the final product, i.e. the ethanol-blended petrol per se, was exempted from all excise-related duties, with the activity of blending ethanol and petrol (either at refinery point or in a warehouse) not being construed as manufacture.

The nil excise regime on 5 per cent ethanol-blended petrol, too, was scheduled to lapse on February 29, 2004. The Finance Ministry has extended this dispensation as well for an additional four months period.