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Harish Damodaran

New Delhi , Dec. 28

FOLLOWING allegations of the gasohol programme being given a quiet burial by the present United Progressive Alliance (UPA) Government, public sector oil marketing companies have invited fresh bids for purchase of 7.83 crore litres of ethanol (anhydrous alcohol) for blending with petrol.

The entire quantity would be used for meeting the requirement of gasohol — petrol with 5 per cent ethanol content — in Uttar Pradesh and Uttaranchal for a one-year period. Of the total tendered quantity of 78,305 kilolitres, for which technical bids have been sought before January 27, 72,895 kl has been earmarked for Uttar Pradesh and the remaining 5,410 kl for Uttaranchal.

The latest tender is expected to benefit Uttar Pradesh-based sugar mills such as Bajaj Hindusthan, Balrampur Chini, the K.K. Birla Group-owned Upper Ganges Sugar (Seohara) and Oudh Sugar Mills (Hargaon), Dhampur Sugar and Simbhaoli Sugar, which have all established large ethanol manufacturing facilities alongside their existing distilleries.

The gasohol programme had become virtually defunct since the last six months, with oil companies not finalising new tenders after the supply period for the previous ones had expired in June for Uttar Pradesh and in May for Karnataka and Maharashtra.

The reason being given by the companies was the inadequate availability of ethanol due to drought in major sugarcane growing areas, particularly in Maharashtra and the South.

While the total ethanol requirement for 5 per cent blending, in those States where the programme was being implemented, was assessed at 363 million litres during 2003-04, the actual quantity that was purchased amounted to only 196 million litres. During the current fiscal, tenders were issued for another 353.55 million litres for Uttar Pradesh, Uttaranchal, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Tamil Nadu, Daman & Diu and Dadar & Nagar Haveli.

But due to difficulties in sourcing ethanol in the western and southern regions, the oil companies sought suspension of the programme for 8 months with effect from August 2004. Mills in Uttar Pradesh, however, contested the move, saying there was no shortage of ethanol in the State. The intense lobbying by them has resulted in the oil companies being forced to float the new tender for Uttar Pradesh and Uttaranchal.

The big issue though relates to pricing. The last tender for Uttar Pradesh in June had failed to sail through mainly over differences over the prices that mills had quoted. The mills had sought Rs 24 per litre, which they subsequently reduced to Rs 22.90 per litre. The oil companies, on the other hand, demanded that the price be set closer to the Rs 17.50 per litre level quoted in the earlier tenders floated last year.

The mills, on their part, say that the prices for ethanol should have parity with the price at which rectified spirit (which has lower alcohol content) is being sold to potable alcohol or alcohol-based chemical based industries. And since prices of molasses and alcohol in general have gone up considerably over the last year, the oil companies should be willing to shell out higher prices for ethanol.

It remains to be seen whether the new tender would also end up getting bogged over the issue of pricing.

More Stories on : Sugar | Non-conventional Energy

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