The Hindu : Tamil Nadu News : Roadblocks to ethanol fuel project

Online edition of India's National Newspaper
Friday, Nov 26, 2004

Tamil Nadu

Tamil Nadu

Roadblocks to ethanol fuel project

By N. Ravi Kumar

CHENNAI, NOV. 25. Uncertainty surrounds the future of the ethanol-blended petrol programme in Tamil Nadu, even as the oil industry evaluates price bids submitted by sugar mills for continuing supply of the molasses byproduct beyond November 30.

Launched in April, after missing several deadlines, in eight districts, the project to supply the five per cent blend seems to be nearing a roadblock with the mills and the companies locking horns over the price of ethanol.

While the mills to which the distilleries are attached demand a higher price primarily citing an increase in molasses price, the oil firms seem to have made up their mind to put the brakes on the programme if the supply price is not economical. "For the sake of continuing with ethanol, the companies cannot increase petrol price," says a senior Indian Oil Corporation official. Such a situation persists despite the recent surge in crude prices — blending petrol with ethanol means an equivalent reduction in imports. Claiming that the companies would be left with no option except reconsidering continuation of the project, he says a clear picture would emerge soon.

A committee of the industry is now evaluating the bids, which the mills submitted responding to its tender in mid-October. The quotes are for continuing supply of ethanol till July 31 next in the Nilgiris, Coimbatore, Dindigul, Erode, Tuticorin, Kanyakumari, Tirunelveli and Ramanathapuram districts.

Hurdles, however, have not been uncommon to the project, launched by the National Democratic Alliance Government in several States to ensure better returns to cane growers, reduce dependence on oil imports and bring down noxious vehicular emissions.

Apart from a delayed start — supply of ethanol-blended petrol was planned Statewide in January 2003 — the programme has overcome several stumbling blocks, including restricted availability and bureaucratic procedures. Prompted by drought and to ensure ethanol supplies for other requirements, the State Government capped the supply of the byproduct (in 2004-05) to oil companies at 20,000 kilolitres.

The presumable delay in finalising the tender and reports of the Petroleum Ministry not being keen on continuing with the project have not gone down well with the mills.

Noting that the manufacturers are awaiting a call for price negotiations, a sugar industry leader says the Ministry laid down fresh guidelines on October 27. Its order says the blended fuel should be sold if the price of sourcing indigenous ethanol is comparable to the price of indigenous ethanol for alternative uses.

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