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Following is the uncorrected text of a statement of Shri Mani Shankar Aiyar Minister of Petroleum & Natural Gas and Panchayati Raj in Lok Sabha today regarding ethanol blended petrol programme :-
"The Government is committed to promote alternative fuels, particularly those that are renewable in nature and can substitute fossil fuels to some extent. The Government is implementing a policy of part substitution of fossil fuels by bio-fuels in a phased manner.
Under instruction of the Ministry of Petroleum & Natural Gas, the oil marketing companies commissioned 3 pilot projects for marketing ethanol blended petrol during the year 2001.
Based on the success of the pilot projects, the Ministry of Petroleum and Natural Gas introduced an ethanol blended petrol (EBP) Programme with effect from 1.1.2003, which envisaged supply of 5% ethanol blended petrol in identified States and Union Territories in the first phase. The programme to blend ethanol with transport fuels is expected to bring better returns to sugarcane farmers, supplement scarce resources of hydrocarbons and bring environmental benefits by reducing pollutants with its properties of helping better combustion. The EBP programme continues to be mandatory, in terms of Gazette notification No. 705 (E) dated 27.10.2004.
Withdrawal of subsidy of 30 Paisa per litre given in ethanol
It was noted that the likely delivery cost of ethanol blended petrol was higher than the delivery cost of petrol. The oil marketing companies were required to lift ethanol through public tenders, blend ethanol with petrol at blending depots located across the States and then supply the same to retail outlets.
Therefore, in order to give incentive, the Government decided to grant fiscal incentives by way of reduction in additional excise duty on petrol meant for blending with ethanol. Accordingly, the additional excise duty of Rs. 6 per litre leviable on petrol was reduced by the Government of India by 30 paisa per litre in the case of petrol intended for use in ethanol blended petrol. The exemption was valid up to 30.6.2004. Also, 5% ethanol blended petrol as a product was totally exempt from payment of the additional excise duty, and this dispensation continues although exemption from additional excise duty was not extended beyond 30.6.2004.
The Government had continued with the fiscal incentive till 30.06.2004. However, with steep increase in price of crude oil in 2004, the Government felt there was little justification for such extension of fiscal incentive as a matter of routine.
Scope of the EBP Programme
The EBP programme has been implemented by the oil marketing companies in the following 10 states and 3 Union Territories:
States
Implemented by
Uttar Pradesh
28.2.2003
Maharashtra
31.7.2003
Goa
31.7.2003
Punjab
30.9.2003
Haryana
30.9.2003
Gujarat
1.11.2003
Karnataka
30.11.2003
Andhra Pradesh
1.1.2004 (in 21 out of 23 districts)*
Uttaranchal
1.1.2004
Tamil Nadu
31.5.2004 (in 9 out of 29 districts)*
Union Territories
Chandigarh
30.9.2003
Dadra and Nagar Haveli
1.10.2003
Daman and Diu
1.11.2003
* The balance 2 districts of Andhra Pradesh (Chitoor and Nellore) are scheduled to receive supply from adjacent state of Tamil Nadu. However, as against estimated requirement of 50,000 KL per annum of ethanol for implementing the EBP programme in Tamil Nadu and in adjacent areas, the State Government has issued excise licence to the ethanol industry for only 20,000 KL. Accordingly, the coverage of areas in these states is not complete.
Ethanol Availability
Considering motor spirit (MS) consumption per annum in the identified states and UTs for continuing with the 5% EBP programme, Ethanol requirement for 5% EBP in all selected States and UTs would be at 2003-2004 MS consumption level, about 363 million litres per annum. As against this, during 2003-2004, the total ethanol that could be purchased by the oil manufacturing companies was only 196 million litre.
Since 2003 and in 2004, difficulties about sourcing ethanol have been reported in respect of Maharashtra, Goa, Gujarat, Andhra Pradesh and Karnataka. Regular supply of ethanol has been affected due to non-availability of molasses resulting from lower production of sugar due to low sugarcane crop/draught conditions. From time to time, based on request of the oil companies about difficulties in implementing the Programme due to non-availability of ethanol, the Government has been holding discussions with the State Governments concerned, the ethanol manufacturers in those States and in case of genuine difficulties, issuing notifications for periodic suspension of the programme in notified areas.
On expiry of the contract for ethanol procurement, fresh public tenders were invited by the industry. During 2004-2005, the oil manufacturing companies issued tenders from time to time for total quantity of 353,547 KL of ethanol for the states of Uttar Pradesh, Uttaranchal, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Tamil Nadu, Daman &Diu and Dadar & Nagar Haveli
Despite tenders, due to acute difficulties about sourcing ethanol in the Western and the Southern Regions, during 2004, the oil manufacturing companies requested the Government to suspend the programme for 8 months with effect from 01.08.2004 and take a fresh decision during the coming sugar season, i.e., October 2004 - September 2005. In the Northern states, although availability problem was not so acute, the prices of ethanol offered for the EBP Programme shot up steeply in tandem with petrol prices. However, the Government did not suspend the operation of the programme, despite requests from the oil companies.
Gazette Notification dated 27.10.2004
In view of practical difficulties being faced in implementing the EBP Programme in its present shape, the Government has recently on 27.10.2004, modified the features of the ethanol blending programme. It is however not factually correct to state that the mandatory order regarding mixing of 5% ethanol in petrol has been withdrawn.
The Government stands committed to the ethanol blended petrol programme as it is intended to support the indigenous sugarcane farmers. The Government also recognises the genuine difficulties faced by the alcohol based chemical industries and the oil marketing companies due to both lower availability of ethanol and high prices at which ethanol is being offered. Henceforth, as per the amended notification dated 27.10.2004, as long as the prices of ethanol are competitive and reasonable, and supply of ethanol is adequate, the oil marketing companies would continue to be statutorily required to lift the same and supply the ethanol blended petrol in notified areas. The areas which have been notified are the States of Goa, Gujarat, Haryana, Karnataka, Maharashtra,, Punjab, Uttar Pradesh, Uttaranchal, Andhra Pradesh(all districts except Chittoor and Nellore), Tamil Nadu (only districts Coimbatore, Dindigul, Erode, Kanyakumari, Nilgiri, Ramanathpuram, Tirunelveli, Tuticorin, and Virudhunagar), and the Union Territories of Chandigarh, Dadra & Nagar Haveli and Daman & Diu.
The amended notification dated 27.10.2004 states that 5% ethanol blended petrol shall be supplied in identified areas if (a) the indigenous price of ethanol offered for ethanol blended petrol programme is comparable to that offered by the indigenous ethanol industry for alternative uses , (b) the indigenous delivery price of ethanol offered for the ethanol blended petrol programme at a particular location is comparable to the import parity price of petrol at that location, and, (c) there is adequate supply of ethanol.
This measure is expected to facilitate the ethanol consuming industry in taking fair commercial decisions, while the ethanol manufacturers would be assured of off-take of ethanol by the industry if the price and supply of ethanol are reasonable and consistent.
The oil manufacturing companies have decided to float fresh tenders for ethanol procurement in conformity with the present guidelines. This is also desirable in order to ensure that the molasses based alcohol/ethanol industry get a fair chance to offer either ethanol for the EBP programme, or ethanol/alcohol for the alcohol based chemical industries as per their commercial decision, particularly in a year when the total production of sugar and molasses are very low. The oil manufacturing companies would also be able to take a fair commercial decision based on the market prices, particularly since they frequently absorb, under Government directions, under-recovery from non revision of prices of petroleum products even when these become due.
The Ministry of Petroleum and Natural Gas has also decided to monitor the progress of the revised ethanol blended petrol programme on a fortnightly basis. Also on 20.12.2004, a review meeting for monitoring implementation of the ethanol blended petrol programme was taken. Inter-alia it has been decided that an inter-ministerial task force at the initiative of the Ministry of Petroleum & Natural Gas with representatives of Ministry of Agriculture, Department of Food, Ministry of Chemicals & Petrochemicals and Ministry of Panchayati Raj shall look in to all aspects regarding smooth implementation of Ethanol Blended Petrol Programme".
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