Panel on ethanol pricing may not suggest cap on use

A committee in the Planning Commission, which is working out the ethanol pricing model, may not suggest any sectoral cap on the use of the fuel, either for the ethanol blending programme (EBP) or for other uses.

The committee, in its initial discussions, had proposed to cap the use of ethanol at around 400-500 million litres for the government’s ethanol blending programme, which aims at blending ethanol in a 5 per cent proportion with petrol.

The committee is expected to finalise its recommendations this week on the pricing of ethanol, which is likely to be in the range of Rs 27-30. Official sources said the report would restrict itself only to the pricing and its formula while may not deliberate anything on other issues.

The formula might link the price to those of petrol or crude — worked out as the ‘refinery gate price’ adjusted with excise payments. The food ministry had also suggested to link it to the price of sugarcane as well so that it will take care of the volatility and current market trends in sugarcane production while pricing ethanol.

Reportedly, while suggesting the cap in its interim report, the committee was of the view that even if just 500 million litres were earmarked for the blending programme, then 500-700 million litres will be left for the chemical industry after meeting the demand of the potable sector. The committee has observed that this quantity of 500-700 million litres is lower than the ‘normative’ requirement that approximates the usage in past two years, but is close to actual consumption in the immediately preceding two years.