5 yrs on, ethanol-blended petrol remains non-starter

Nearly five years after a Group of Ministers recommended a mandatory 10 per cent blending of ethanol in petrol as vehicle fuel, the implementation of the idea remains in the doldrums.

Reason: none of the ministries consulted agrees with the Ministry of New and Renewable Energy's proposal regarding ethanol-blended petrol (EBP).

The most vociferous opposition has come from the Planning Commission and the Department of Chemicals who have rejected mandatory blending, and supported the view of the PM's Economic Advisory Council (PMEAC) that given the fickle supply of the biofuel, blending should be kept optional.

PMEAC had said the percentage of ethanol blended and its procurement price should be left to market forces so as not to help one sector at another's cost. This would allow the oil marketing companies (OMCs) to achieve targets in line with the availability of ethanol, it argued.

The proposal was listed to be taken up by the Cabinet Committee on Economic Affairs (CCEA) at its meeting on Friday, but was deferred, sources said. While backing mandatory blending, the renewable energy ministry had asked the CCEA to choose between the pricing proposed by the Saumitra Chaudhuri Committee and leaving it to market forces.

The Chaudhuri panel had recommended last year that ethanol should be fixed at Rs 27 per litre with a floor of Rs 23 and a ceiling of Rs 31, with the provision of a review by an inter-ministerial group in the event of a breach of the price band in two successive quarters. In the note put up for CCEA's approval, the Planning Commission said it supported PMEAC so that the "agricultural producer gets the best possible price for the produce".

The Department of Chemicals argued that making EBP mandatory would hurt the chemicals industry by diverting its share of ethanol to the OMCs. It said that 5 per cent EBP would require 105 crore litres of ethanol annually, even though the OMCs could procure only 36 crore litres last year. The Department of Agriculture & Cooperation supported mandatory blending, but objected to fixing a price band for ethanol. It backed market-based free pricing of the biofuel, a concept ingrained in the PMEAC report.

... contd.

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