Date:10/05/2005 URL: http://www.thehindubusinessline.com/2005/05/10/stories/2005051001091000.htm

Back Long-term supply of ethanol for blended petrol programme — ISMA yet to respond to draft MoU

Richa Mishra

New Delhi , May 9

THE Ministry of Petroleum and Natural Gas is still awaiting response from the Indian Sugar Mills Association (ISMA) to sign a memorandum of understanding (MoU) to ensure long-term supply of ethanol.

According to official sources, a draft MoU on long-term supply of ethanol by the sugar industry for the ethanol-blended petrol (EBP) programme had sent to ISMA for consultations among ethanol manufacturers. The response was awaited, the sources said.

In March, the representatives of the ethanol industry had assured the Ministry and the oil marketing companies (OMCs) that they were in a position to maintain a sustained supply of the required quantities of ethanol. It was agreed that the President of ISMA, on behalf of all ethanol suppliers and a senior Petroleum Ministry official, would work out a draft MoU for long-term supply.

Ethanol is used as an automotive fuel by itself and can be mixed with gasoline to form what has been called `gasohol'. In India, it is produced from molasses, a by-product of sugar.

The Ministry had implemented three pilot projects on blending five per cent ethanol with petrol — two in Maharashtra and one in Uttar Pradesh. In September 2002, the Government had resolved to introduce supply of five per cent EBP, in stages.

The States, which have been notified are: Goa, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Uttar Pradesh, Uttranchal, Andhra Pradesh (all districts except Chittoor and Nellore), Tamil Nadu (Coimbatore, Dindigul, Erode, Kanyakumari, Nilgiri, Ramanathpuram, Tirunelveli, Tuticorin, and Virudhunagar), and the Union Territories of Chandigarh, Dadra & Nagar Haveli and Daman & Diu.

However, due to problems related to excise duty and jurisdiction, transport permits along with inconsistent availability of ethanol, the EBP programme could be introduced in phases only.

During 2003-04 as against a requirement of 3,63,000 kilolitres (KL), the total quantity of ethanol that could be purchased was 1,95,996 KL. The supply was seriously affected since April 2004 particularly in Maharashtra, Gujarat, Goa, Andhra Pradesh and Karnataka.

In fact, the oil companies had requested for the suspension of the programme and a review of the position in 2005, which was not accepted by the Government.

On Government's commitment to the EBP programme, sources underlined that purely on environmental considerations, the Ministry would like to continue with the programme.

The Ministry, however, felt that it was not apparent that the EBP programme had indeed motivated the sugarcane farmers in increasing acreage under cultivation, which was also one of the objectives of the programme.

The Ministry has assured the industry that if ethanol is available for the programme at reasonable prices, it shall be lifted by OMCs.

Meanwhile, the Ministry had convened a meeting in the last week of April with the chief secretaries, the excise commissioners and cane commissioners of the States and Union Territories where the EBP programme is under implementation to sort out many State-level issues such as taxes, duties and allocation of ethanol for the purpose of blending.