Friday, January 28, 2011




From R Rajagopalan

NEW DELHI: Environmentalists' pipe dream of using more and more ethanol as "green" petrol instead of petrol converted from the the crude oil to save the foreign exchange remains unmaterialised.

If you think that five per cent of petrol you buy is ethanol, just forget it. The Centre certainly mandated 15 months ago to blend five per cent ethanol in petrol. Its decision, however, remains on paper even after 15 months.

It is so because of a running feud among the ministers of chemicals, petroleum and agriculture, each one of them having vested interest in lobbying for own interest group and putting the ball in the PM's court to take a final view.

Prime Minister Manmohan Singh as usual, however, prefers to remain neutral, putting the policy decision in limbo. The happiest is the liquor industry that is the biggest consumer of the indigenously produced alcohol up to 60 per cent as its supplies will dwindle of the same alcohol is to go into blending petrol.

Ethanol is nothing but pure alocohol produced as a by-product of the sugar mills from otherwise worthless molasses and as such its diversion for mixing in petrol may hit the liquor industry and the chemical industry that depend on it heavily.

Dithering for 10 months after the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister decided the mandatory blending in its meeting on November 12, 2009, the Petroleum Ministry issued orders last August to the oil companies to start procuring ethanol at an ad hoc ex-factory price of Rs 27 a litre.

Chemicals Minister M K Alagiri, however, cried halt to the procurement and dashed off letters to the Prime Minister to intervene, the latest on January 11, pointing out that it would starve the alcohol-based chemical industries that require the industrial alcohol as an important feedstock to produce acetic acid, ethyl acetate and other chemicals.

He also took a stand that this industry contributes to green chemistry by using Ethanol instead of opting for the petrochemical route and so it should not be starved, more so when the calorific value ofethanol is 35 per cent lower as compared to petrol, making waste of the precious by-product of sugar mills for blending with petrol.

Agriculture Minister Sharad Pawar, on the other hand, has written to the Prime Minister to ensure that the CCEA-approved ethanol blending programme is not derailed at a critical stage when the country expected a good sugarcane crop and the oil companies contracted 580 million litres of ethanol at Rs 27 a litre.

He has made out a case that a successful ethanol-blended petrol (EBP) will ensure an adequate and timely return to the sugarcane farmers. He also pointed out that the government support for EBP has also been quite extensive in countries like Brazil and United States where it has reached wide acceptability.

Pawar also trashed the draft recommendations of an expert committee constituted by the government for finalising price of ethanol as Rs 27 a litre was decided only as an ad hoc rate. He asserted that the committee has gone beyond its mandate to recommend that the first priority in allocation of alcohol should be for the potable sector (read liquor industry), secondly to the industrial sector and only the leftover quantity for the EBP programme. This recommendation is "not in consonance with the deliberations held in various meetings of the committee," Pawar added.

In his January 11 letter to the PM, Alagiri has, however, challenged Pawar's contention that the draft report of the committee went beyond its mandate. He says: "...mandate of the committee is to recommend the formula/principle for pricing of ethanol after taking into account various factors/dynamics affecting the pricing. The committee is also required to look into different aspects in pricing of ethanol inter-alia including the impact on competing industries."

Alagiri quoted from the committee's first draft interim report that "the government intervention is never intended to deprive users of resources and principle of equity is to be adhered in allocation of resources." He sought the PM's intervention "so that the interests of alocohol-based chemical industry are not hampered."

He pointed out that production of ethanol or alcohol as you may call it in 2009-10 was around 1600 million litres, 900 million litres of which went to the liquor industry, leaving only 700 million litres left to be shared by the chemical industry and EBP while the chemical industry's requirement itself was 1100 million litres and it had to import as much as 350 million litres of industrial alcohol at a cost of Rs 800 crores.

The chemicals minister also rubbished the environmentalists' stress that the gradual shift to ethanol by blending it with petrol will save precious foreign exchange on the crude oil imports. He points out that the alcohol-based chemical industry also contributes to the foreign exchange earnings and savings of about Rs 4500 crores in terms of direct exports and reduced imports of the end products.

The ethanol-based chemical industry employs about one lakh persons. If ethanol is not available to the chemical industry, prospects of closure loom large on the sector, jeopardising employment opportunities in the sector, Alagiri added.


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