The petroleum ministry has proposed a reduction in the Customs duty on denatured alcohol and molasses to stabilise the 5 per cent ethanol-blending programme in petrol. The programme has been hit due to a dip in the sugarcane output in the current year.
“The duty on denatured alcohol is proposed to be brought down to 5 per cent from the current 7.5 per cent, while the duty on molasses is likely to be reduced to 5 per cent from 10 per cent,” said a petroleum ministry official.
The proposal was awaiting Union Cabinet’s approval since March, he added.
Both denatured alcohol and molasses can be processed to manufacture ethanol. Ethanol is considered as green fuel and blending will help reduce India’s dependence on crude oil imports.
A worldwide sugar glut last year saw prices crash, as a result of which farmers shifted to other crops that fetch better prices. The 17 per cent decline in the country’s sugarcane acreage in the 2008-09 rabi season has impacted the production of molasses, the raw material for ethanol. Sugarcane output in the next season is expected to improve marginally.
Blending at 5 per cent requires 600 million litres of ethanol annually. However, there has been ethanol shortage to the tune of 40 per cent this year. While ethanol availability has been an issue this year, the oil marketing companies (OMCs) have been unable to take up blending in states like Tamil Nadu and Kerala due to the taxation policy of the governments of these states and other procedural bottlenecks.
“Apart from ensuring supplies, the government should persuade states to facilitate ethanol blending,” said an industry source.
The OMCs are procuring ethanol at a price of Rs 21.50 a litre from the sugar mills through a tendering process. Some companies also had plans to start ethanol production on their own. Hindustan Petroleum Corporation, for instance, bought two sick sugar mills in Bihar last year, but no further progress has been reported on this front. In January, the company deferred plans to buy four sugar mills in Andhra Pradesh.
In October 2007, the Cabinet Committee on Economic Affairs had approved 10 per cent ethanol blending on a mandatory basis from October 2008 across the country, excluding J&K and the North-eastern states.
The deadline, however, has lapsed and as of now, only 5 per cent blending is under implementation. The 5 per cent blending was introduced in November 2007.
