New Delhi: Even as the government has mandated blending of ethanol with petrol at 5% by volume with immediate effect and to 10% from October 2008, differences have emerged between various ministries on the outcome of the initiative.
While the agriculture ministry is in favour of 10% blending, which it says will divert sugar cane into production of ethanol and thus help boost sugar prices, the petroleum and natural gas ministry is of the opinion that such an exercise will not be possible as the sugar-cane production varies and is cyclical in nature.
“The 5% blending should have been stabilized first and only then 10% blending should have been made mandatory. This is keeping in mind the availability of supplies. Boom is sugar-cane production in one year is followed by a bust in another,” a petroleum and natural gas ministry official, who did not wish to be identified, said.
At the uniform purchase price of Rs21.50 a litre fixed by the govt, manufacturers may not supply ethanol if sugar-cane output falls as they would find better rates from the chemical and liquor industries
Ethanol, a pure form of alcohol, can be made from a variety of agricultural produce—from corn to sugar cane. It is increasingly finding favour among consumers in different countries as crude prices rise to record highs placing an upward pressure on petrol and diesel prices.
An earlier move by the National Democratic Alliance-led government to blend transport fuel with 5% ethanol some years ago was scrapped over non-availability of the sugar cane-based product.
India is the world’s second largest producer of sugar, behind Brazil, and the largest grower of sugar cane. At present, due to two bumper crops of sugar cane, the industry is saddled with excess stocks of sugar, resulting in a progressive slump in market prices. The industry is also expecting a good crop in the coming year.
A consultant said India should be flexible in setting ethanol blending targets rather than mandate a fixed percentage-based use. “Brazil has been very successful in the area of ethanol blending and India should pick from Brazil’s experience. In an economy which is significantly dependent on agriculture, our policy should be flexible,” Ravi Mahajan, partner at audit and consulting firm Ernst & Young, said.
With total sugar production touching 29 million tonnes (mt) in 2006-07 (the season ended on 30 September), molasses production is projected at 14.8mt, with the potential to produce 3,300 million litres of alcohol, according to sugar industry statistics.
At the proposed level of 10% blending, a full implementation of the government’s order would require around 1,130 million litres of ethanol. Today, more than one-third of alcohol produced in India is absorbed by the liquor industry.
Further explaining the rationale, the petroleum and natural gas ministry official added that the earlier blending programme failed as the sugar cane crop went through a bad year. “It had proved to be a non-starter as the sugar-cane production had declined,” the official said. This time too, he added, “at the uniform purchase price of Rs21.50 per litre for supply of ethanol fixed by the government, no manufacturer will provide ethanol at this price if sugar production falls as they would find better rates from the chemical and liquor industry”.
An industry expert disagreed with this view. Rajshree Pathy, chairman and managing director of Rajshree Sugars and Chemicals Ltd said an environment will have to be created to implement ethanol blending at 10% as approved by the cabinet. “Unless there is a political will to implement the programme at state levels, the ethanol programme will not become a reality,” she said. “There is enough sugar production in the country today to make the blending programme happen and if we don’t implement it now we will lose out on a huge opportunity.”