By Ruma Dubey

With fuel prices constantly on the rise, and expected to only go up further as and when crude rises, India needs to work on a war footing on finding alternatives. Well, no money is being spent on R&D in India but even the idea which was mooted and had started actually working too has been on the backburner.

Almost six years ago, it was proposed to make 10% blending of ethanol in petrol as vehicle fuel mandatory.  An extremely workable idea but it never really took off like so many other things. And what is the roadblock? Believe it or not, amongst many ministers, even the Planning Commission and the Department of Chemicals which had supported past Govt’s Prime Minister’s Economic Advisory Council (PMEAC) which had stated that it should be optional and not mandatory as supply of this biofuel is fickle.  5% of ethanol-blended petrol (EBP) would require 105 crore litres of ethanol annually and oil marketing companies are able to procure only in the region of 30-40 crore litres.  The PMEAC had also voiced concern that the sugar or ‘ethanol’ sector could benefit at the cost of others.

But the real big problem was the pricing. Till some time ago, the Cabinet Committee on Economic Affairs (CCEA) had recommended that the price of ethanol be fixed at Rs 27/litre with a floor of Rs 23 and a ceiling of Rs 31. Pricing of ethanol is again a minefield like subsidy on fuel as majority of the big sugar mills are owned by big wig and politicians and no one wants to take a call right now about ‘fixing’ the price of ethanol. But last week, with an eye on making ethanol blending lucrative for the sugar mills, stated that the proposed pricing formula for ethanol would be based on the average of the refinery transfer price (RTP) or cost of petrol to the oil marketing companies for the previous financial year instead of the lowest RTP. Currently, ethanol benchmark price stands at Rs.44/litre and this price was arrived at based on the lowest RTP. As against this, the ex-mill realization is at around Rs.38/litre and that of rectified spirit or extra neutral alcohol is a little better at Rs.40-41/litre. The sugar companies naturally have a preference for an averaging of RTP of the previous fiscal and not lowest RTP. As per data on the Petroleum Ministry site, some 65 litres of ethanol offers from OMCs have been finalized and till date, in the current sugar season, some 35 litres have been taken by the OMCs.

Today, we are talking about making 10% mandatory while the Govt has not even managed to make 5% fully compulsory. Why are we the common people bearing the brunt of every rise in crude pricing because of lop-sided policies of the Govt? New cars get launched yet not one single manufacturer is working with the Govt to reduce oil import bill? If car makers push, just as they do when they want duties to be reduced, wont the Govt relent? In fact the Federation of Cooperative Sugar Factories in Maharashtra has time and again pleaded that the ethanol purchase price be revised higher, along with mandatory 10% ethanol blending with petrol. In short Govt procedural delays and lack of a workable pricing formula for ethanol has not allowed EBP to take off. And now we hope that the new Govt, will be able to push this through and take the much needed step towards better fuel management.

A few pertinent pointers as to why EBP should be made mandatory:

What exactly is ethanol?

Ethanol is a byproduct of the sugar industry. Currently, ethanol is used for making alcoholic beverages and the same ethanol is as fuel, produced by fermentation. In technical terms, when certain species of yeast, metabolises sugar in the absence of oxygen, ethnol is produced. Simple, molasses, a by-product of sugar mills is the raw material.  In the United States, ethanol is usually made from corn. In Brazil, it's most commonly made with sugarcane. Wheat, barley and potatoes are also sources of ethanol.

Why ethanol for blending into fuel?

Ethanol can be used as an automotive fuel by itself and can be mixed with gasoline to form what has been called "gasohol". Because the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions. Since ethanol is produced from plants, it is a renewable fuel.

Can companies get into ethanol production?

A company can become an ethanol producer either by setting up a sugar unit or by following the simplest route which many companies have taken – taking over existing sugar mills.

What would be the cost of setting up a new unit?

As per Ethanol India, to set up an ethanol unit using rectified spirit as raw material, with a capacity of 30,000 litres per day, it would cost Rs.3.84 crore. Same capacity, using raw material as molasses would cost Rs.7.90 crore and using sugar cane juice would cost Rs.15.25 crore.

What is the downer to EBP?

Developed countries are making more and more use of foodgrains as fodder for fuel and that, to a large extent has been the culprit, many say, leading to a run-up in the commodity prices. Creating significant amounts of energy from food crops could deplete the amount of land available for growing actual food for people to eat and that is one big concern and extremely controversial even in developed countries.  But an alternate – cellulosic ethanol can also be worked out wherein, instead of diverting food grains for production of ethanol, nonfood products such as corn stalks, wood chips and switch grass could also be used. 

The initiative needs to be there or else, without ever venturing out into the deep waters, how will one know the perils and joys of the wide sea?