The Department of Chemicals and Petrochemicals has urged the Petroleum Ministry to restrict its ethanol blending programme at 5% due to scarce production of ethanol and deficit in its availability for the chemical sector.
According to official sources, chemical companies need ethanol as a basic chemical for various products and the pressure to move for 10% ethanol blending programme is causing major problem for businesses in the chemical sector.
As per the government mandate, ethanol is considered a green fuel and its blending with petrol will help reduce India's heavy dependence on crude oil imports. But ethanol is also used by the chemical and alcohol industries and the prices of the fuel in these two sectors determine its cost to the oil marketing companies (OMCs).
While blending at 5% has been made mandatory, now the government proposes to make it 10% that is with each litre of petrol, 10% of the composition should contain ethanol.
On the other hand, the farmers are getting incentivised to divert ethanol for ethanol blending programme. The Food Ministry has assured the sugar mills of an enhanced price of ethanol to be procured by the oil marketing companies to comply with the requirement of blending 5% ethanol with petrol.
According to sources, while the sugar mills have demanded a price of Rs 40 per litre, the oil marketing companies had procure it last year at Rs 30-32 per litre and are not willing to increase it much. However sources said the sugar mills will not be a position to supply ethanol if they are not offered at least Rs 35-37 per litre this year. In fact, the Food Minister has supported doubling of the mandatory blending of ethanol with petrol to 10% from the earlier five%. Industrial alcohol, a byproduct of sugarcane crushing is an important raw material for paint and ink, agrochemicals, pharmaceuticals, textiles and polyethylene terephthalate (PET) bottles.
The Cabinet Committee on Economic Affairs in November last year mandated five% ethanol blending in petrol sold after June 30, 2013. It also allowed oil companies to negotiate the price with domestic and overseas suppliers of the bio fuel. Given the import costs, the imported ethanol is steeply priced compared to the domestic ethanol.
The Indian sugar industry has the capacity to produce 250 crore litres of alcohol annually. Its major buyers are chemical industry, whose demand is 60 crore litre, potable alcohol industry, which sources 110 crore litre, and oil companies need around 100 crore litre annually, as per last year’s figure.
Blending at the rate of 5% will require 1,050 million litres ethanol annually. But the OMCs (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have procured only 400 million litres since January 2013. Blending in states like Uttar Pradesh, Haryana, Punjab, Delhi and Karnataka has been taking place at 10% but in several other states like Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat only 5% has been achieved. At the national level, only 2 to 2.5% blending is happening against a target of 5%.
