Was a lacklustre Union Budget designed to lower our expectations from the Modi sarkar?
The bench mark price of ethanol has been fixed at Rs44 per litre and the government had made it mandatory for OMCs to blend 5% ethanol with petrol, which has now been increased to 10% but actual lifting has been unsatisfactory
Oil Minister, Dharmendra Pradhan, admitted in the Lok Sabah recently, that the OMCs (Oil Marketing Companies) were able to "achieve" only a 1.37% blending of ethanol with petrol against the target of 5% which, had recently been increased to 10%.
The Indian Sugar Mills Association (ISMA) had assured the government of their willingness to reach 10% blend level across the country, but sought flexible ethanol blending with petrol, ranging from 5 to 25%, depending upon sugar cane availability.
The sugar mills are currently realising about Rs32 per kg for sugar.They can produce only 95kgs of sugar for every tonne of cane crushed and 45kgs of molasses yielding about 10.8 litres of ethanol. However, if the entire juice from cane is used for fermenting into alcohol, there would be
no production of sugar but 72 litres of ethanol could be obtained.
The bench mark price of ethanol has been fixed at Rs44 per litre and the government has made it mandatory for OMCs to blend 5% ethanol with petrol/diesel, which, as reported above, had now been increased to 10% but actual lifting has been unsatisfactory. Moneylife had reported earlier, that while the sugar mills had a stock of 65 crore litres of ethanol, only 35 crore litres had been lifted by OMCs, resulting in huge blocking of funds. If such a situation should continue, nothing prevents state governments from permitting sugar mills to convert sugar cane juice to alcohol.
It has been reported in the press that higher ethanol blending would hit the liquor industry, a fear that may have caused lower blending rate.OMCs must realize their responsibility and ensure that they lift ethanol from mills on a regular basis and also make available blended petrol/diesel at all
government transport depots besides all major bus terminals. In fact, every pumping stations must be asked to ensure availability blended petrol/diesel so that the consumption is increased.
The ISMA, in a press report, has stated that the estimate for the current season, 2014-15 is expected to be 25.3 million tonnes of sugar, a mere 4% increase over last year, with both UP and Tamil Nadu showing a shortfall but offset by increase in Maharashtra, Karnataka and Gujarat. The carryover sugar stock at 7.5 million tonnes is more than the required buffer and should take us through comfortably to the next season, even after providing for exports.
Luckily, the monsoon's progress, as advised by IMD (Indian Metrological Department) shows that they expect the rainfall to be well distributed and there will be adequate showers throughout the country, which will reduce the deficit predicted earlier due to an El Nino effect.
In the meantime, it is imperative for the government to take serious steps against the OMCs for not complying the required blending programme that have been made mandatory. One way of enforcing such a rule is to tell the OMCs that unless they lift and blend ethanol from mills, they won't be given the subsidies committed by the government.
Such a threat alone will work with OMCs, who must also be forced to focus on setting up ethanol blended petrol/diesel units in all the pumping stations throughout the country. As a start, this could be enforced in all the sugarcane producing states where the mills are established. If such actions are not taken, sugar mills may start looking for export market to sell their ethanol.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)