Government committees generally work at their own pace, however much that may be a source of disquiet for parties whose fate is to be decided by the recommendations. The committee headed by Planning Commission member, Saumitra Chaudhuri, to recommend a formula for pricing ethanol for use by oil marketing companies (OMC), too, falls in that pattern.
One understands that the committee only in its last leg of meetings since its constitution six months ago address the pricing formula.
According to ethanol producers, if the committee is coming round to linking ethanol price to that of gasoline, then it is as it should be. But, if it has in mind to deeply discount ethanol price to gas price on the basis of their comparative calorific value, then that begs a justification. This is particularly so since five per cent ethanol blending programme (EBP) will, if anything, give better mileage to cars, courtesy ethanol’s good oxygenate properties.
A study by Indian Oil Corporation confirms this. In fact, yet another study done over a three-year period in Delhi using 100 government vehicles of different age has not found any fall in mileage with as much as 10 per cent ethanol blended fuel compared with pure gasoline.
Doubts arose as to whether the committee at any stage went beyond its terms of reference, as it considered competing claims for alcohol derived from sugar by-product (molasses) by producers of potable alcohol, chemicals and ethanol. In fact, when the committee, in an interim report, suggested a certain volume of ethanol for blending with gasoline during 2010-11, sugar mills had to point out the digression. In the meantime, sugar factories have signed contracts with OMCs for supplying about 600 million litres of ethanol at a provisional price of Rs 27 a litre. The supply is to support five per cent EBP.
Whatever be committee deliberations so far, sugar factories will be wrong in thinking that any member is ill-disposed to EBP and is out to favour chemical units using alcohol as the feedstock by wanting to peg ethanol price at a level-making supply of the intermediate product a non-paying proposition for sugar factories. Using import parity price, robust behaviour of crude, with the Organisation of Petroleum Exporting Countries not inclined to raise daily production and local depot price of petrol, industry officials want around Rs 35 for a litre of ethanol.
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Those nursing apprehensions about adequate availability of alcohol for the above three sectors will do well to read a statement by the Indian Sugar Mills Association (Isma) saying sugar production forecast of at least 25.5 million tonnes during 2010-11 will result in alcohol output of 2,736 million litres, to be reinforced by 150 million litres from khandsari units and another 400 million litres from grains. The potable drink sector’s requirement is pegged at 1,000 million litres, leaving a balance of 2,286 million litres for use by the other two groups.
Assuming an annual demand growth rate of five per cent for alcohol by chemical units, Isma puts their requirements at 419 million litres. So shortage in a bountiful sugar season, like the current one, is not a possibility at all. But in a difficult year, it is always possible to import, with the government waiving import duty of 7.5 per cent on alcohol.
As we busy ourselves in discovering as to whether chemical units or EBP should get preference in the allocation of alcohol – the potable drink sector in any case remains the holy cow – we are losing sight of the potential of ethanol use in curbing greenhouse gas emissions and also reducing our dependence on crude imports. Fuel, but mostly POL (petroleum and crude oil products), accounts for 33-34 per cent of the country’s import bill. That ethanol derived from sugarcane is the best among biofuels finds confirmation in a report by the US Environmental Agency saying sugarcane ethanol has life-cycle greenhouse gas emissions 61 per cent lower than fossil fuels.
No doubt, this benign nature of ethanol derived from sugarcane has propelled Brazil, the world’s second biggest producer of the chemical after the US, to rapidly increase ethanol output, offering car owners a choice of filling the tanks either with 100 per cent ethanol, or a blend with 80 per cent gasoline. Flex fuel cars run on Brazilian roads burning only ethanol. In the Brazilian mines and energy ministry’s programme to lift the annual production of ethanol to 64 billion litres by 2019 from over 26 billion litres now, there is enthusiastic participation by foreign oil groups like Shell and BP and global commodity groups like Bunge and Louis Dreyfus.
Brazil, which mostly makes ethanol directly from cane, is left with considerable surplus of the chemical for export after taking care of rising domestic requirements. And such is the US commitment to biofuels development that it refuses to buckle under criticism, becoming increasingly shrill that use of nearly four bushesl of corn out of every 10 for making ethanol is responsible for the commodity’s price inflation.
But, as the world is now smarting under food inflation like the one experienced in 2008, the debate on the desirability of committing food land to produce ethanol can only become increasingly intense. This, however, is not an issue here, since our sugar factories make the chemical from the by-product, molasses.