The government’s programme for five per cent mandatory blending of ethanol with petrol could receive a setback thanks to large-scale diversion of ethanol by sugar mills for producing industrial and portable alcohol.
Mills have reported total sugar output at 23.65 million tonnes so far this season, which means overall production could be 2,400 million litres of extra neutral alcohol (ENA, a byproduct) during the current season alone. ENA is the raw material for ethanol and for alcohol. At five per cent mandatory blending with petrol as recommended by the Planning Commission and subsequently approved by the Cabinet Committee on Economic Affairs, the industry would require 700 million litres of ethanol.
Oil marketing companies (OMCs) had floated a tender in January–February to procure 1,010 million litres of ethanol during the current season. It has yet to get going, since the government has not decided to increase the price of the green fuel. The ministry of petroleum has approved a price of Rs 34-35 a litre for ethanol, up from the existing Rs 27 a litre. However, this has not been notified, due to stiff resistance from the ministry of chemicals.
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“We are moving towards a situation where ethanol may not be available even if the government fixes a higher price in the coming months. Since ENA is in high demand from alcohol manufacturers in the domestic and foreign markets, the supply of the green fuel may remain scarce this season,” said Deepak Desai, chief consultant of ethanolindia.net, a consultancy.
Of the 610 million litres of ethanol offered by sugar mills to the government last year, 580 million was finalised. Surprisingly, the OMCs signed contracts for procuring only 470 million litres from sugar mills; they could not lift the finalised quantity.
This year, the scenario is different. OMCs have not yet started lifting ethanol due to the government’s failure to decide its price. While the industry is demanding a hike of Rs 7 a litre, to Rs 34 a litre for the current season, the ministry of chemicals is resisting, and suggests procuring it at the old price at Rs 27.
“ENA’s realisation from the alcohol industry is Rs 9 a litre higher than ethanol. So, it makes business sense for sugar mills to sell ENA to alcohol manufacturers,” said Abinash Verma, secretary general, Indian Sugar Mills Association. Sugar mills, especially from Uttar Pradesh, have been supplying ENA and molasses to European countries at higher prices, he added.
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The sugar industry and ethanol manufacturers have been supplying ethanol for the past 18 months at a provisional price of Rs 27 a litre, though their alternative products from molasses are fetching Rs 34-35 a litre.
India is the second largest sugarcane and sugar producer in the world, after Brazil. In Brazil, blending is mandatory up to 25 per cent of ethanol with petrol; pure ethanol can also be used by flexi-fuel cars. If five per cent of mandatory ethanol blending is implemented, the government would require 470 million litres of the green fuel.