Oil Ministry offers Rs 21 a litre for ethanol

Petroleum Ministry has offered a price of Rs 21 a litre for ethanol, about 35% more than the price for equivalent calorific value fuel that the government wants to use for doping petrol.

Ethanol gives 44% lower energy than petrol and as per international practices, like the one followed in world's largest ethanol-petrol blender country Brazil, it should have been priced at roughly 60% of the manufacturing cost.

The energy equivalent price of ethanol works out to Rs 15.60 a litre taking one-year peak petrol cost of Rs 26 per litre but the ministry at a meeting with Indian Sugar Manufacturers Association (ISMA) last week, has offered a price of Rs 21 a litre, industry sources said.

ISMA is, however, not satisfied with the price and wants Rs 28-29 a litre, a price even higher than the cost of importing petrol.

In 2005-06, ethanol manufactuers were paid a price of Rs 18.75 a litre.

Sources said Indian Oil Corp, representing industry, at the last meeting called by Petroleum Secretary on July 25, strongly advocated pricing ethanol according to its calorific value (energy equivalent price).

In Brazil, ethanol is priced 50-60% of petrol price due to its lower energy content.

Sources said Government wants to make 5% of ethanol blending in petrol mandatory and a Cabinet note circulated recently for the purpose even suggested importing ethanol from Brazil (only).