10% ethanol blending is mandatory from October

New Delhi : In a bid to resolve the sugar imbroglio, the government has decided to boost ethanol production by making 10 per cent blending with petrol as mandatory from the next year starting October 2015.

A decision was taken by the Petroleum Ministry after Prime Minister Narendra Modi in a recent meeting said promoting ethanol production in a big way is the long-term solution for cash-starved sugar mills, which owe over Rs 14,000 crore dues to cane growers.

Interestingly, it is compulsory to blend 5 per cent ethanol with petrol, as of now, but oil marketing companies (OMCs) are able to mix only around 2 per cent. "Sugar mills will be asked to increase ethanol production from the 2015-16 marketing year (October-September) to meet the demand of 230 crore litres for 10 per cent blending with petrol," a senior official said.

OMCs will also be asked to procure ethanol based on 10 per cent blending requirement from the next year, he said. To avoid piling up of surplus sugar stocks next year, the official said mills will be asked to step up ethanol output following the 'B-heavy' molasses route to help reduce sugar output by 1.5 million tonnes annually.

Normally, mills manufacture ethanol only from 'C' (final -stage) molasses, a by-product of sugarcane. "It makes economic sense to manufacture higher quantity of ethanol instead of sugar, considering a sharp fall in sugar rates in view of surplus stocks both in domestic and global markets," the official added.

Mills can earn as much as Rs 48-49 per litre of ethanol. In the case of sugar, they are not even able to recover the production cost as ex-mill rate has fallen below Rs 20 per kg now.

There has been a weak response from sugar factories to the ethanol-blending programme. So far this year, OMCs have been able to contract 82 crore litres of ethanol as against the requirement of 133 crore litres for five per cent blending.