Green fuel plans pick up pace
India’s green fuel plans are turning hot. Cars in most parts of the country will soon be able to use Bharat III level fuels doped with ethanol.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: India’s green fuel plans are turning hot. Cars in most parts of the country will soon be able to use Bharat III level fuels doped with ethanol. The government is planning to expand distribution of E5 petrol to 21 states, up from the initial 10.
Oil companies are thus likely to buy almost two times more ethanol from sugar companies every year. India is the world’s fourth largest producer of ethanol, behind the US, Brazil and China, with a total capacity of 2.6bn litres.
In a new tender expected shortly, the government is planning to expand the number of states under the ethanol doping programme to 21.
Except for the North-East, all other parts of the country are likely to start consuming. The tender is also likely to contract volumes for three years, instead of one. Oil companies are expected to procure 580m litres each year, up from 350m litres last year. Expansion of the E5 programme is learnt to have the full support of Prime Minister Manmohan Singh.
Once the tender is floated, the doping of petrol can start from October. Both the larger quantity and the longer period of the contract is expected to bring cheer to sugar companies. Moreover, as oil companies will be buying through an open tender instead of a negotiated price, all players would have an equally good chance of getting a slice of the business at competitive prices.
With almost all sugar units possessing large ethanol capacities, collective bargaining was any way expected to be a non-starter. One of India’s largest sugar companies is learnt to have already offered ethanol to oil companies at Rs 21.50/litre versus the old price of Rs 18.75/litre. The sugar industry as a whole has been demanding an ex-distillery price of at least Rs 27/litre for ethanol to which oil companies refused to agree. Duty-paid imported ethanol today costs Rs 29/litre.
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Though India has increased its ethanol capacity by 25% in one year, mainly due to heavy investments by sugar companies, it may still not be enough to meet full demand. According to industry estimates, while the alcohol industries buy 800m litres, chemical companies buy 900m litres, potable alcohol another 800m litres, and now oil companies 580m litres.
Together that adds up to a demand of 2.3bn litres, allowing most distilleries to run at 85% capacity. The government has made it mandatory for refiners to blend 5% ethanol in Bharat III level fuels in 10 states and three Union Territories, starting from October ’06. It was to be increased to 10% in ’07, depending upon the success of the programme. Bharat III is equivalent to Euro III.
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