The Hindu : Tamil Nadu News : Ethanol tender delay hits `green' petrol supply

Online edition of India's National Newspaper
Tuesday, Dec 07, 2004

Tamil Nadu

Tamil Nadu

Ethanol tender delay hits `green' petrol supply

By N. Ravi Kumar

CHENNAI, DEC. 6. Supply of the eco-friendly ethanol-mixed petrol has come to a standstill in Tamil Nadu, as in other parts of the country, with the oil industry and sugar mills unable to conclude an agreement for extending the programme.

The disruption in the programme, launched in nine districts this April, however, could be temporary, as the industry, on the instructions of the Petroleum Ministry, is working on fresh guidelines for arriving at ethanol price.

"There have been no ethanol supplies after November 30 by the sugar mills, as a fresh tender for continuing the programme beyond December 1 could not be finalised," according to a senior Bharat Petroleum Corporation Limited official.

Following this, the oil companies have stopped dispensing the five per cent ethanol-mixed petrol, except in some small pockets.

Even this supply will stop once they exhaust the available stocks of the molasses by-product.

The tender for supply of ethanol up to July next would be shortly scrapped, oil industry sources say. The Ministry had instructed the "pricing group," comprising officials of the national oil company, to study the issue. This followed an industry's communication about its inability to fix the price as per a guideline prescribed by the Ministry in late-October.

The Ministry notification said sale of the five per cent ethanol-blended petrol could be continued if the price of ethanol is comparable to the import parity price of petrol at the supply location. In other words, the price of ethanol should not exceed the notional import price of petrol — oil companies only import crude — exclusive of the local taxes.

Since the price quoted by the sugar mills, for ethanol supplies beyond November 30, was not in tune with the guideline, the oil industry is examining the possibility of recommending to the Ministry that the local petrol prices should be considered as the benchmark.

The pricing group that met in Mumbai on Friday, sources say, is also likely to recommend inclusion of escalation and a de-escalation cause in the guideline/tender.

More stumbling blocks

If the Ministry accepts the group's recommendations immediately, then the possibility of floating a fresh tender early next month is bright, sources say. But, if the recommendations are sent back with suggestions for change or for further comments, the invitation for bids could be delayed. Then there are possibilities of the oil companies calling for bids for supply for the next financial year.

However, delaying the resumption could lead to more stumbling blocks for the programme. The State Government had only issued licence to the sugar mills to supply 20,000 kilolitres of ethanol for the purpose and its validity expires on March 31.

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