Oil firms fight shy of ethanol

Ever since the 5 per cent ethanol blending programme began in November last year, the oil marketing companies (OMCs), Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, have only lifted 100 million litres of ethanol from the distilleries of sugar mills.

"While the annual ethanol demand at 5 per cent blending is estimated at 550 million litres, the lifting by OMCs until July 15 was only 100 million litres, less than one-fifth of the annual requirement. Such irregularities in the programme are compounding problems for the industry, already reeling under heavy losses", said sugar industry sources.

"The slow lifting of ethanol is significantly impacting sugar companies who are facing storage problems owing to a bumper production of molasses (12.20 million tonnes this year against 8.55 million tonnes last year). As these units have committed to supply ethanol to OMCs, they cannot dispose it elsewhere", they added.

Moreover, the programme has failed to take off in five states (West Bengal, Orissa, Madhya Pradesh, Chattisgarh and Kerala) even nine months after it began in November, owing to issues of taxation by respective state governments.

The programme was supposed to be implemented in all the states except Jammu & Kashmir and North-East.

"There seems to be a lack of seriousness among the OMCs so far as the ethanol blending programme is concerned, primarily because the programme is not mandatory. Last year, while the original schedule of starting the programme was October, it began in November only with a couple of states", said sources. This explains the logic behind the sugar group of ministers' (GoM) recommendation last month to make the programme mandatory. A final decision on this has to be taken by the Cabinet.

The original idea behind the programme was to reduce the dependence on imported gasoline, save foreign exchange and control pollution as ethanol is a green fuel.

Talks of 10 per cent blending by the government prompted sugar companies to add capacities in ethanol, making huge investments. Annual ethanol production capacity in the country currently stands at 1,500 million litres compared with 1,300 million litres last year.