The tussle between sugar and ethanol lobby over ethanol blending has taken a new turn. The expert committee on ethanol pricing, headed by Planning Commission member Saumitra Chaudhuri, wants the quantity of ethanol for blending to be restricted to 400 million litres as of now. This is not even half the quantity sought by the oil marketing companies for implementing five per cent mandatory blending with petrol.
In its draft report, the committee said it was “neither feasible nor appropriate to require that the alcohol-based chemical industry be effectively denied access to domestically produced alcohol”. Though the chemical industry has welcomed these views, the sugar industry sees it as overstepping of brief by the committee.
The chemical industry, led by companies such as Jubilant Organosys and India Glycols, is one of the primary consumers of molasses, which is processed to make ethanol. The liquor and ethanol industries are the other users. The chemical industry has been opposing the mandatory nature of blending and a fixed price of Rs 27 per litre. “The committee has reiterated what we have been saying all along. There is an availability issue and there is no point in launching a programme that will not be successful but also affect the existing users,” said Rakesh Bhartia, CEO, India Gylcols.
Avinash Verma, director general of the Indian Sugar Mills Association, said, “The mandate of this committee is only to arrive at a pricing formula. It does not have a jurisdiction to deliberate on issues of availability or non-availability, especially when the five per cent mandatory blending has been approved by the Cabinet. Moreover, the oil companies have finalised ethanol contracts of 600 million litres, whose supply is to begin from November”.
The committee was set up to recommend the pricing formula of ethanol after taking into account the various factors affecting the pricing. It was also asked to examine the different aspects implicit in the pricing, including the impact on the pricing of sugarcane and petroleum products and the impact on competing industrial use.
The estimated alcohol requirement of potable liquor industry for 2009-10 was 1,070 million litres. It is likely to be around 1,100 million litres in 2010-11. Alcohol for industrial use (primarily chemical) has varied between a low of 530 million litres in 2008-09 and 1,010 million litres in 2006-07. The chemical industry has stated to the committee that its regular requirements are of the order of 1,000 million litres annually. Blending at five per cent will require 1,000 million litres ethanol.
The committee is of the view that even if just 500 million litres are earmarked for the ethanol programme, then 500-700 million litres will be left for the chemical industry after meeting the demand of the potable sector. The committee has observed that this quantity of 500-700 million litres is lower than the ‘normative’ requirement that approximates the usage in past two years, but is close to actual consumption in the immediately preceding two years.