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Ethanol-blended petrol plan likely to be deferred

With prices of molasses and rectified spirit going through the roof, the proposed 10 per cent ethanol-blended petrol programme, supposed to be effective from next month, has been practically shelved.

The Cabinet Committee on Economic Affairs (CCEA) had, last year on October 9, approved making 10 per cent doping of petrol “optional” from October 2007 and “mandatory” from October 2008 across the country, except in Jammu & Kashmir, the North-East and the Island Territories.

TECHNICALITIES

Subsequently, the Bureau of Indian Standards (BIS) had laid down the technical specifications for E-10, i.e. 10 per cent ethanol-blended petrol.

The new product was incorporated in the BIS specification for Motor Gasoline (IS-2796).

Currently, only five per cent blended petrol is dispensed through fuel outlets.

But now, it seems that the programme will not take off on its scheduled date.

RED TAPE

The Petroleum Ministry is yet to even issue the formal notification making 10 per cent blending mandatory, which is a precursor for public sector oil marketing companies (OMC) to float tenders to procure the additional quantities of ethanol.

“It has been decided not to go ahead with mandatory 10 per cent doping from next month. Instead, the latest proposal is for a pilot project study to be undertaken by Indian Oil Corporation (IOC) and other OMCs using E-10 petrol in Maharashtra and Uttar Pradesh (UP),” official sources toldBusiness Line.

Pilot Studies

Simultaneously, the Automotive Research Association of India (ARAI), the Indian Institute of Petroleum, Dehradun and the International Centre for Automotive Technology (I-CAT), Manesar (Haryana), have also been asked to do pilot studies.

A sum of Rs 12.19 crore has been sought from the Ministry of Heavy Industries and the Oil Industry Development Board (OIDB) for funding these projects.

The sources said the decision to defer the mandatory introduction of E-10 petrol took into account reservations expressed by auto manufacturers.

“The Society for Indian Automobile Manufacturers (SIAM) has raised certain concerns about the compatibility of the present auto engines with petrol having 10 per cent ethanol content.

It was, therefore, suggested that we do pilot studies for E-10 similar to that ones that were conducted earlier for E-5 petrol,” they added.

Rising alcohol prices

But a more fundamental reason may have to do with the recent spurt in alcohol prices.

Currently, sugar mills is Maharashtra are selling rectified spirit, containing 95 per cent alcohol, at Rs 35-39 a litre, depending upon quality.

Extra Neutral Alcohol (ENA) used for potable purposes – which has lesser impurities and alcohol content of 96 per cent – is fetching an even higher rate of Rs 43 a litre.

ENA prices are similarly ranging between Rs 38 a litre in UP and Rs 45 a litre in Andhra Pradesh.

MILLS UNHAPPY

On the other hand, mills have been supplying ethanol, which has 99.8 per cent alcohol content, to OMCs at Rs 21.50 a litre – a rate that the October 9 CCEA meeting had fixed “for the next three years”. Given the realisations now from rectified spirit (which is a lower-purity product), mills may not be very keen to sell ethanol to the OMCs, unless the price is negotiated at a higher level.

Availability Crunch

Moreover, there is the problem of availability, with mills expected to crush only 210 million tonnes of cane in the coming sugar season (October-September).

Taking an average molasses recovery of 4.7 per cent and alcohol production of 230 litres from every tonne of molasses, total alcohol output will be around 2,300 million litres.

As against this, the annual consumption by alcohol-based chemical manufacturers and liquor units is estimated at 900 million litres each, with OMCs lifting another 560 million litres for five per cent blending of petrol.

There may not be enough alcohol, then, to meet the higher blending requirement unless mills process sugarcane juice directly to alcohol.
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