Chemical industry raps higher ethanol blending decision

Says supply of industrial alcohol, a sugar byproduct, will shrivel; demands this move to help the sugar industry be given up; latter says criticism is nonsense

Fearing an input shortage due to the decision to raise the level of compulsory blending of ethanol in petrol, the chemical industry has urged the Union government to  roll back the decision without delay. In a letter to the ministries of chemicals, finance, commerce, food and petroleum, the Indian Chemical Council (ICC) said the move would lead to reduced supply of industrial alcohol, a valued raw material for a number of downstream industries.

Earlier this week, Food Minister Ram Vilas Paswan announced a doubling of the mandatory blending of ethanol with petrol to 10 per cent from the earlier five per cent. Industrial alcohol, a byproduct of sugarcane crushing is an important raw material for paint and ink, agrochemicals, pharmaceuticals, textiles and polyethylene terephthalate (PET) bottles. “Raw material supply will run dry for the chemical industry, resulting in increasing reliance on import. For saving Rs 100 on crude oil import, the government will spend Rs 200 on chemical import. Hence, the government should review the ethanol policy and roll back the entire blending proposal immediately,” said Rakesh Bhartia, vice-president, ICC.  Industrial alcohol is a pre-form of ethanol, used as ethyl acetate for the paints and inks industry, ethoxilate for agrochemicals and textile industries, and monoethylene for making PET bottles.

The ICC representation says: “With 10 per cent mandatory ethanol blending, the supply deficit will go up to 920 mn litres, assuming sugar products at around 24 mn tonnes. In the past few tenders, sugar mills have not been able to supply the quantity tendered by oil marketing companies. Hence, increasing the blending percentage will only widen the supply deficit. Ultimately, India will end up with importing ethanol instead of crude oil. The suffering chemical industry will have to import both raw material and finished products. Thus, India will end up with importing more for saving less.”

Countering this view, Narendra Murkumbi, managing director of India’s largest ethanol producer, Shree Renuka Sugars, said: “We have not received even a single enquiry from the chemical industry in the past three months. If the chemical industry is facing a shortage or anticipating a supply shortage in future, players should have come forward and book the quantity for the future, as happens in other industries. We are ready to sign long-term contracts with the chemical industry, provided some players come forward to do so.” He says the chemical industry argues that import of ethanol is feasible at Rs 35 a litre against the average price paid by OMCs for domestic tenders at Rs 43 a litre.

But, import is currently feasible only at Rs 44 a litre with export commitment and Rs 50 a litre without commitment.

“The import cost of industrial alcohol will be lower than that of ethanol. The chemical industry has not imported even a single drop so far. This indicates there is no dearth of raw material supply to the chemical industry,” said Murkumbi.