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Ethanol blending schemse  

Ethanol blending scheme trips on pricing hurdle

NEW DELHI: The government's much-vaunted Ethanol Blending Programme (EBP) continues to hang fire despite a group of ministers (GoM) headed by finance minister Pranab Mukherjee endorsing a price of Rs 27 per litre last month. The Cabinet is yet to take a decision on the contentious issue over which the petrochemicals department has registered serious objections, although it was to come up before it in the last fortnight. "Contrary to suggestions, there has been no conclusive decision on ethanol pricing by the Cabinet yet," a fertiliser ministry official told ET. Consequently, the "interim" price for ethanol is yet to be officially notified. It is only after this is done that the expert panel headed by Planning Commission member Saumitra Chaudhury is likely to start its work on long-term "remunerative" pricing for ethanol.

Ironically, food and agriculture minister Sharad Pawar pre-emptively indicated that the "long-term" price was likely to be lower than Rs 27/litre. He also urged the sugar industry to produce more ethanol to fetch "a good price," besides allowing farmers a good price for their sugarcane. The ministry views the EBP as a means to saving subsidy in sugar industry bailouts in cane glut periods. In May, Mr Pawar said that a reconstituted GoM, including non-conventional energy minister Farooq Abdullah, endorsed an early April decision to hike ethanol price to Rs 27/litre from the Rs 21.50/litre paid for the earlier supply contracts. Ironically, the higher suggested price was despite the fact that sugar prices worldwide have dropped 46% this year on fears of a supply glut. At an earlier meet held on April 6, Pranab Mukherjee had agreed with the agriculture minister on the issue of pricing, contending that the chemicals sector should pay this same rate for ethanol in the new supply contracts. Mr Mukherjee suggested priority to the EBP programme.

Mr Mukherjee had also said that should the landed cost of imported ethanol be higher than Rs 27/litre, the chemicals industry should take up its demand for the reduction of import duty (so that prices would be reduced) on industrial alcohol with the commerce ministry separately. "The fact is, currently the landed price of imported ethanol is around Rs 27/litre. Should the duty on industrial alcohol be slashed from 7.5% to zero after imported prices go up, they will still be able to access ethanol at a slightly lower price than Rs 27/litre," a sugar industry official said.
The inordinate delay over kickstarting the new supply contracts for the much vaunted EBP of the government comes even as questions have begun to arise from various quarters over the basis on which both the government and the industry have projected sugar output close to 25 million tonnes in 2010-11. 
..from the pages of The Economic Times.

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