Renewingindia: News & Articles

Ethanol blends in India viable only if excise, sales tax are slashed

In India, the economics of mixing ethanol with petrol will work out only if the excise duty and sales taxes on ethanol are slashed. Due to the high incidence of these imposts, the current delivered price of ethanol is close to Rs 25 per litre. This is much higher than the cost of imported petrol.

The landed cost of imported petrol is around Rs 9 per litre. The cost of handling at the port and transporting it over a long distance has to be added on. Based on this calculation the petroleum ministry considers an ex-distillery price of Rs 13-14 per litre of ethanol as reasonable. However, the sugar industry is of the view that a reasonable price would be Rs 15.50 to Rs 16 per litre.

The use of ethanol as an auto fuel would come as bonanza to the sugarcane farmers and give a fillip to the beleaguered sugar industry. It would also save precious foreign exchange spent on oil imports. It is for this reason that Petroleum Minister Ram Naik, Agriculture Minister Ajit Singh and Food Minister Shanta Kumar are seeking an ethanol-friendly tax regime.

Estimates show that sufficient ethanol could be made available for blending it in a 5 per cent proportion with the total petrol consumed in the country. The projected availability of ethanol in the country and the requirement for blending shows a marginal shortfall.

However, about 15 per cent of molasses is currently not being converted into alcohol due to the surplus availability of the product. Once there is a firm demand for ethanol more of this unutilised molasses will be spared for production of alcohol for conversion into ethanol. This would be sufficient to bridge the shortfall.

At present there is hardly any demand for ethanol as a result of which very few distilleries are making ethanol from alcohol. Additional equipment such as dewatering columns have to be installed for the purpose which requires an investment of Rs 1 to 1.5 crore. Kumar has already got the Cabinet approval to amend the sugar development fund Act so that loans can be given to sugar factories at concessional rates for installing this equipment.

|| Renewable Energy || Bio Energy | Solar Photovoltaics | Solar Thermal | Wind | Hydro | Tidal | Emerging Technologies|
|| Alternative Fuels || Conventional Fuels | Ethanol & Alternative Fuels | Technologies | Environmental Issues |
|| Energy Efficiency || Electrical | Thermal | Industry | Agriculture | Financing Energy Efficiency | Escos | Education |
|| Energy Finance || Power Generation | Renewable Energy | Energy Efficiency | Agriculture | Industry | Escos | Micro Finance |
|| Climate Change || GHG | Agenda21 | Kyoto Protocol | CDM | Early Action | Ozone Layer Depletion |
|| GEP-ABC | Education | Pictures |