Financial Daily from THE HINDU group of publications
Monday, Aug 30, 2004
Industry & Economy - Petroleum
Ethanol-blended fuel in short supply
Chennai , Aug. 29
THE ethanol-blended fuel programme in the southern States has hit a roadblock with sugar industries finding it more lucrative to supply ethanol for industrial and potable alcohol, according to sources.
Oil companies, which see this programme more as an effort to help sugar industries rather than being of economic benefit, are not complaining.
They do not find much value in procuring ethanol despite the mounting costs of crude - the ethanol programme is simply too small to make a dent in their expenses and only represents a lot of paperwork.
The price mismatch has been sparked by the drought. The sugar mills to which the distilleries are linked are facing a shortage of sugarcane.
So, molasses, a by-product in sugar production and raw material for distilling ethanol is in short supply.
Molasses prices are on the rise, and the anhydrous ethanol price of Rs 17.50 a litre, negotiated with the oil companies is no longer seen as viable.
Last year, when the previous tender for anhydrous ethanol was finalised, molasses had ruled around Rs 500 a tonne but now commands Rs 2,500.
Distilleries get a better price of Rs 18-21 a litre on supply of rectified spirit to industries.
For the oil companies, to whom the landed cost of anhydrous ethanol works out to about Rs 23 a litre on the base price of Rs 17.50, anhydrous ethanol is just not worth it.
In Andhra Pradesh and Karnataka, where the previous tender period ended in May, anhydrous ethanol supply has come to a halt.
Distilleries are holding out for about Rs 30-35 a litre; similarly, in Maharashtra too, ethanol-blended fuel supply has stopped.
In Tamil Nadu, supplies continue in a limited area because the programme took off much later than in other States.
Ethanol-blended fuel is sold only in eight districts because only 18,000 kl of anhydrous ethanol is available, which is less than half the required quantity.
Ethanol-blended petrol is available in the Nilgiris, Coimbatore, Dindigul, Erode, Tuticorin, Kanyakumari, Tirunelveli and Ramanathapuram districts, according to officials.
The programme, which started in April 2004, will continue up to November.
Oil companies hope to call for tenders to continue further supplies but they are sceptical about continuing with the programme under the existing conditions.
However, they have started the process of calling for the next tender in September.
Meanwhile, the purported environmental benefits of using ethanol-blended fuel and the possibilities of anhydrous ethanol substituting significantly the requirement of imported crude - to save the country millions of dollars - have taken a backseat, according to industry watchers.
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