Govt forms GoM to resolve ethanol blending issue

The government has constituted a Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee to resolve differences over mixing ethanol extracted from sugarcane in petrol.

The GoM was necessitated after the chemical industry opposed the petrol blending programme on grounds that it will eat into the requirement of alcohol for potable purpose, official sources said.

Both ethanol and alcohol are made from molasses and sugar industry has estimated a production of 160 crore litres in 2009-10.

Potable liquor sector needs about 100 crore litres while the five per cent ethanol-blending programme would require 68 crore litres. Besides, molasses are also required for industrial purposes.

The five-member GoM also includes Agriculture Minister Sharad Pawar, Heavy Industries Minister Vilasrao Deshmukh, Petroleum Minister Murli Deora and Chemical and Fertiliser Minister M K Azhagiri, sources said.

Sources said the Azhagiri's ministry had opposed the proposed increase in price oil companies pay for buying ethanol to Rs 27 per litre from Rs 21.50 currently.

The Petroleum Ministry had not been able to implement the 2007 decision of mandatory doping of 5 per cent ethanol in petrol due to non-availability of the product from producers.

A price increase was supposed to lure the producers into selling ethanol to oil firms, but the Chemical and Fetiliser Ministry protested saying petrol-doping programme will impinge upon the demand of potable liquor sector and chemical makers.

Sources said the Prime Minister's Office put the oil ministry's move on back burner and asked the Cabinet Secretary to resolve issues.

A GoM has been constituted in this backdrop, they said.

Potable liquor sector and chemical producers are two primary consumers of molasses-based alcohol.

It was stated that the demand for potable sector was increasing and there was no justification to increase ethanol price to Rs 27 per litre.