The Hindu Business Line : Oil firms step up lifting of ethanol from sugar cos

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Oil firms step up lifting of ethanol from sugar cos

Programme makes headway as States rationalise duties

Harish Damodaran

New Delhi, Aug 30 With most States, barring Tamil Nadu and West Bengal, coming on line and rationalising the duties on ethanol, the Centre’s gasohol programme is slowly taking off after languishing till quite recently.

“In the last month or so, we see things really moving on the ground and the oil companies have stepped up lifting of ethanol,” said Mr Narendra Murkumbi, Managing Director of Shree Renuka Sugars Ltd, which has contracted the largest chunk of ethanol supplies (217.382 million litres out of a total 1061.046 million litres) over a three-year period.

Renuka Sugars is now said to be supplying about six million litres per month. Bajaj Hindusthan Ltd (BHL) – which, along with its affiliate, Ojas Industries, has contracted the second biggest quantity of 146.568 million litres – is currently doing monthly sales of eight million litres.

Till about a month or so, oil companies had lifted barely 100 million litres under the five per cent ethanol-doped petrol programme, which was formally launched in November last year. “The companies were willing to lift, but the problem lay in the assortment of duties levied by the various State Governments. Now that most of them have come on line, the situation has changed for the better,” industry sources said.

Problem states

Over the past few months, Bihar and Jharkhand reduced the ‘import fee’ for ethanol entering their States from Rs 5,000 per kilolitre (kl) to nil, with Delhi (from Rs 4,040 to nil), Haryana (from Rs 5,000 to Rs 1,000), Rajasthan (from Rs 6,000 to Rs 1,000), Madhya Pradesh (from Rs 3,500 to Rs 1,000) and Orissa (from Rs 3,000 to Rs 1,000) also cutting their levies.

Further, Karnataka and Gujarat have slashed the sales tax on ethanol from 20 to four per cent. The only two problem States are Tamil Nadu and West Bengal. In Tamil Nadu, the annual alcohol demand is estimated at 170-180 million litres, with potable liquor accounting for 120 million litres and chemical units another 50-60 million litres.

Alcohol demand

“High prices of petroleum-based feedstock have led to a sudden increase in alcohol demand from acetic acid and other chemical manufacturers such as Chemplast and Trichy Distilleries. Since the gasohol programme requires another 50 million litres, the State Government has decided not to allocate alcohol for making ethanol,” the sources noted.

West Bengal, too, is yet to issue the necessary ethanol allocation notification, which, the sources alleged, had to do with the “strong liquor lobby in the State”.

No plans to make blending a must

There is no proposal before the Centre to make 10 per cent ethanol blending ‘mandatory’ from October 2008.

“The Group of Ministers (GoM) on sugar, which met on July 24, has only recommended the existing five per cent doping level to be made mandatory nationwide with immediate effect. The 10 per cent blending from October 2008 has only been suggested as optional and as a target to be considered,” highly-placed sources said.

The sources pointed out that sale of 10 per cent ethanol-doped petrol would first of all require framing of appropriate standards by Bureau of Indian Standards (BIS). The current BIS specifications only permit up to five per cent blending.

There is also opposition apparently from a section of automobile manufacturers, who feel the existing engines will not be able to tolerate 10 per cent ethanol-doped petrol, especially when the petrol that is being dispensed already contains water, naphtha and other adulterants.

Companies such as Renuka Sugars, Bajaj Hindusthan and Balrampur Chini are expanding their distillery capacities, keeping in view the projected demand for ethanol. Bajaj Hindusthan and Balrampur Chini would have total alcohol capacity of 800 kilolitres per day (KLPD) and 420 KLDP, respectively, by 2007-08.

Renuka Sugars has recently acquired a 100 KLPD distillery at Akluj (Maharashtra) in addition to its existing capacity of 450 KLPD in Karnataka. The company plans to expand its total capacity to 1,150 KLPD by 2009.

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