OMCs' ethanol pacts not enough for petrol plan

Another tender possible; sugar industry may then commit more.

Oil marketing companies (OMCs) have issued letters of intent for only 70 per cent of the ethanol supply offers made by the sugar industry and standalone distillers for the petrol blending programme.

Of the 1,000 million litres (ml) of offers made by the industry, around 30 per cent have been disqualified for technical reasons, for inability to show that the molasses used in producing ethanol were indigenous.

The tender issued by the OMCs said the ethanol for blending should be produced from indigenous biomass such as sugarcane or starch-containing material such as corn and cassava or cellulosic material such as bagasse, wood waste, and indigenous molasses.

“Those who have been disqualified are primarily the standalone distillers, mainly in Maharashtra, who purchase rectified spirit from sugar mills (who do not have ethanol facility) and process it to make ethanol. Such units are unable to show the sourcing of molasses,” said a sugar industry executive.

Against a tender requirement of 1,050 ml, the ethanol producers had made supply offers of 1,000 ml last month. This was more than the 860 ml required for five per cent petrol blending. An Indian Oil official said OMCs have issued letters of intent to only 70 per cent of the offers. So, the blending programme cannot be nationally implemented for the whole year, unless more quantities are tendered.

A sugar industry official said the industry might offer more if a fresh tender is brought in, as they now have a more reliable estimate of sugarcane output.

Ethanol blending with petrol at five per cent continued for about two years before coming to a halt in October last year, due to low supply on account of dip in sugarcane output. Against a demand of 1,800 ml for the period of 2006 to 2009, the sugar industry supplied only 585 ml. Consequently, in the latest round, the OMCs have insisted on stringent penalty clauses for non-supply or default by sugar companies.

Ethanol is considered a ‘green’ fuel and blending will also help reduce India’s heavy dependence on crude oil imports. Some OMCs also have plans to start ethanol production themselves. Hindustan Petroleum Corporation, for instance, bought two sick sugar mills in Bihar in 2008 to produce ethanol. These mills will start producing ethanol from this December.