Date:14/01/2006 URL: http://www.thehindubusinessline.com/2006/01/14/stories/2006011401611200.htm

Back Sugar coops to supply ethanol to oil PSUs

Our Bureau

Mumbai , Jan. 13

THE domestic sugar industry wishes to do a Brazil with ethanol-blended gasoline. Though Brazil's benchmark of over 40 per cent of its automobile fuel coming by way of ethanol is a distant task for the Indian sugar industry, fresh targets are getting set by the domestic sugar sector.

The National Federation of Co-operative Sugar Factories Ltd, accounting for over 50 per cent of the country's sugar production, has said the public sector oil companies should try and raise ethanol content to 10 per cent in blended petrol. As a first step, it has signed an agreement with the oil PSUs to ensure steady supply of ethanol from its 300-strong member sugarcane crushing factories.

There is still a shortfall of 2,25,000 kilolitres (kl) of ethanol for the oil companies whose current demand is put at 4,35,000 kl. The contracted supply that the public sector oil companies have on hand is good for 2,10,000 kl of ethanol.

, Dr N.G. Kannan, Director, Marketing, Indian Oil Corporation, told reporters that 10 per cent ethanol blend was achievable, but supply at five per cent should be steady.

"Once the current requirement level is steadied, one can look at taking the blending level to 10 per cent. This would mean a big boost for the Indian sugarcane farmers and also significant forex savings for the country," Dr Kannan said.

The first phase of the ethanol-blended petrol was to have been launched in January 2003, but it has taken the industry a good three years to iron out start-up glitches. One issue was that ethanol imported from Brazil was available at a lower price than domestic ethanol.

Clearly, sugar production has begun to look up at 20 million tonnes this year, up nearly 2 mt from some 18 mt a year ago. Having gone through a massive slump, Maharashtra, a top producer saw its production touch a nadir at 2.3 mt last year but is expected to shake off the blues this year with an estimated production of 5 mt.

And the ethanol production too is looking up and could well double from the present level of 1.85 mt. The benchmark purchase price of ethanol has been kept at Rs 18.75 litre by the oil PSUs, which the sugar factories federation has accepted as a fair price.

"We are in a position to deliver the remaining 2,25,000 kl this year. For this, individual factories will have to sign separate contracts with the oil companies for ethanol supply. However, it will be a tough ask if the blending levels are raised to 10 per cent," said Dr M.R. Desai, President, National Federation of Cooperative Sugar Factories.