Chemical sector wary of ethanol blending

Domestic manufacturers of chemicals are voicing their concerns over making ethanol blending mandatory from October.

The country is facing a shortage of alcohol, with around 30-35 per cent of the total annual domestic requirement being met through imports.

Their apprehension is that once blending is made compulsory, alcohol meant for the chemical industry will be diverted for consumption in blending.

Industry sources said about half of the country's manufacturers of alcohol-based chemicals had already shut down operations in the last six months owing to the shortage of alcohol.

"Blending will have an immediate impact on the Rs 5,000-crore alcohol-based Indian chemical industry," they said.

The Indian Chemical Manufacturers' Association (ICMA) also echoes the same view.

According to the association, on account of the alcohol shortage units are closing down and the scenario will worsen further. Members of the association said limited land availability, water shortage and issues like food security made the ethanol blending programme an unviable option in the country.

In India, the chemical industry and portable liquors are the major consumers of alcohol.

The chemical industry is estimated to consume 95 crore litres of alcohol and the liquor sector another 60 crore litres in 2006-07. Of this consumption requirement, 120 crore litres will be produced domestically and the rest will be imported. The sources said blending would require an additional 60 crore litres of alcohol.

"Making blending mandatory amid scarcity of alcohol will only artificially jack up the prices, which will benefit only a handful of sugar mill owners. The current prices of ethanol in the Rs 18.75 a litre range should be brought down to the level of Rs 12-15 a litre," the sources said.

The ICMA has demanded that ethanol be bought at energy equivalent price parity to gasoline, i.e. 60 per cent of the import parity prices of gasoline. In Brazil, ethanol is priced at energy equivalent price vis-a-vis gasoline.

In 2005-06, the country recorded consumption of 8.6 million tonne gasoline. And taking 5 per cent ethanol blending as base, the requirement of ethanol would have been 58 crore litres a year. Considering the consumption growth, the requirement is expected to go above the 60 crore litres level this year.