Ethanol-doped fuel may attract concessional duty

NEW DELHI: The Centre is likely to consider the sugar industry’s demand for the reintroduction of concessional duty of 75 paisa per litre on ethanol-doped fuel. The demand, taken up by the sugar industry with food minister Sharad Pawar recently, refers to the concession allowed in the Union Budget 2002 but subsequently withdrawn. The demand is expected to be taken up while finalising Budget 2007.

Pointing out that the ethanol-doped fuel did not enjoy the support of state governments, the industry has emphasised that restriction on movement between states continues due to ‘high and different rates of tariff’ in the form of entry tax and import fees. The industry has asked for removal of tax on inter-state movement of ethanol to ensure removal of supply bottlenecks.

Movement of molasses, used for ethanol production, should not be controlled by state governments, the industry has said. “This will go a long way in ensuring uninterrupted supply of ethanol to oil companies,” industry representatives have emphasised.

Indian Sugar Mills Association (ISMA) president Chandra Shekhar Nopany pointed out that similar concessions and incentives were offered by many countries for speedy development of their Ethanol Doping Programme (EDP). In particular, China and Thailand have shown remarkable growth.

According to ISMA, the Chinese government has managed to increase ethanol production from 2.8 billion litres in 2000 to 3.85 billion litres in 2006, on the back of incentives offered to speedily implement 10% blending in several provinces. Support measures were also in force in the US and Europe, the association has informed Mr Pawar.

“...the government of India may also reintroduce concessional duty structure on ethanol to encourage the rapid growth of the programme if we want to catch up with the rest of the world,” the sugar industry has maintained.

The Centre recently missed the mid-November deadline for the implementation of the first phase of 10% doping of petrol and diesel with ethanol. However, industry sources say that except for two states, the rate for ethanol has been tied up satisfactorily in most states where the bidding process has been completed. In view of this, all hurdles on the road to the implementation of the first phase (5% doping countrywide of petrol and diesel) have been removed.

The roadmap for 10% doping is expected to be announced next year and this is expected to provide supplementary revenue and sustain sugar industry’s bottomline growth. At the present rate of consumption of petrol and diesel alone, the ethanol requirement for 10% blend of each of the products would mean additional demand of around six billion litres of ethanol per year. The industry estimates this demand to turn into additional income to the tune of Rs.6500 crore.