Govt may blacklist ethanol makers on failure to supply to OMCs

The central government, which has stepped up efforts for the blending of ethanol in a 5 per cent proportion with petrol, has threatened to blacklist ethanol manufacturers if they fail to supply the commodity to oil marketing companies (OMCs).

Food and Agriculture Minister Sharad Pawar has asked the ethanol producers not to dilly-dally over the supply and soon enter into an arrangement with the OMCs at Rs 27 per litre (at ex-mill rates). OMCs have offered to keep the ethanol price stable at Rs 27 per litre for three years. However, this rate does not include excise duty, transportation cost and other expenses. The zone-wise price of ethanol will differ after adding all these costs.

Pawar’s warning comes at a time when a large number of ethanol manufacturers, especially cooperative sugar mills, are reluctant to supply, on the grounds that this would incur loss in the first year at the proposed procurement price of Rs 27 per litre. Instead, they are eager to sell molasses, currently priced at Rs 5,500 per tonne. Informed sources told Business Standard today that OMCs, including Indian Oil Corporation, Bharat Petrolum Corporation and Hindustan Petroleum Corporation, are expected to hold talks with ethanol manufacturers this week to chalk out a final roadmap on this issue.

According to the oil ministry data, the 5 per cent ethanol blending programme (EBP) is being carried out in 16 states and 3 Union Territories (UTs) out of 20 states and 4 UTs identified for implementing the programme. The requirement of ethanol for the three-year period is 1.8 billion litres. The OMCs have been able to contract 1.46 billion litres. They had procured 573.3 million litres under the programme as on August 2009.

Under this programme, ethanol releases are yet to start in Orissa, Chhattisgarh, West Bengal, Tamil Nadu, Kerala, Jharkhand and Puducherry, where the programme has not taken shape due to non-resolution of issues like procedural problem and taxation policy, affecting the commercial viability in the implementation of the programme.

The parliamentary standing committee on petroleum and natural gas recommended that, “Considering the present constraints and the fact that oil companies have been able to procure only 573.3 million litre of ethanol, the Committee desires that 5 per cent EBP may be implemented in a curtailed form in a few states to make it more relevant and effective and the government to come up with a strategy to increase ethanol supply in a time-bound manner instead of leaving the matter open- ended without any time frame.”

The Ethanol Manufacturers Association of India, at its meeting on December 3, had proposed to start ethanol supply to OMCs to avoid Centre’s axe. Similarly, the Federation of Cooperative Sugar Mills in Maharashtra, a representative body of over 170 mills, has asked its members to commence ethanol supply at Rs 27 per litre to OMCs. The Federation believes that mills, though they incur loss in the first year they may make money in the second and third year.