Rajasthan and Haryana are set to join a group of six other states that have reduced or removed the levy on ethanol, giving a boost to the country’s efforts to move to a cleaner fuel and reduce vehicular pollution. The reduction of levies will make it more profitable for have reduced or are set to reduce their levy on ethanol, making it easier (and less-expensive) for fuel retailers such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation to sell ethanol-blended petrol in these states. Ethanol-blended petrol is less polluting than pure petrol.
In September 2006, the state-owned fuel retailers (also known as oil-marketing companies, or OMCs) were directed by the government to sell petrol blended with 5% ethanol in 20 states and four Union territories as part of its effort to promote green fuels. It also set a November 2006 deadline for this.
The OMCs have not been able to adhere to the deadline largely due to the If the companies have let the deadline pass by without implementing the order, it is because of the levies—a duty on ethanol that is brought in from other states—on ethanol which differ from state to state. It ranges from Rs1.5 a litre to Rs6 per litre in different states.
Each state has a levy, a duty on ethanol that is brought in from other states. The levy varies from Rs1.5 a litre in Andhra Pradesh to Rs6 a litre in Madhya Pradesh. The levy affects the profitability of the fuel retailers, who have consequently gone slow on the government’s directive.
“While the OMCs are determined to make the ethanol-doped-petrol programme a success, state governments are taking their time to reduce duty rates,” said Ravi Gupta, president, sugar and alcohol business, Bajaj Hindusthan. The OMCs are yet to finalize the sourcing of ethanol from sugar companies in West Bengal, Haryana, Punjab, Orissa, Chattisgarh, Gujarat and Madhya Pradesh because of high levies.
Apart from Rajasthan and Haryana, six states have reduced or removed levies. Bihar and Delhi, where the levies were Rs5 a litre and Rs4 a litre, respectively, have removed them entirely. Rajasthan has reduced the levy from Rs6 a litre to Re1 and Haryana is expected to bring it down from Rs2 to Re1 soon. Gupta said he expects other states to reduce or remove their levies, too.
At the mandated level of 5%, total implementation of the government order would require 515 million litres of ethanol. India’s sugar industry has the capacity to produce 1,300 million litres of ethanol, and less than a third of the sugar firms in the country produce ethanol. Ethanol is manufactured directly from sugar in Brazil, where most vehicles run on engines that use ethanol partly or fully. In India, it is made from rectified spirit, which, in turn, comes from molasses, a by-product of sugar production.