The crisis-ridden sugar industry may get relief as the Centre on Wednesday held out a promise to make it mandatory to blend petrol with 10 per cent of ethanol in a year’s time.

Union Agriculture Minister Sharad Pawar, who chaired the meeting of ministers and officials from major sugar growing states on Wednesday to deliberate on the problems faced by the sugar industry, announced after the meeting that “we have reached a general understanding with state governments on 10 per cent blending of ethanol with fuel to be made mandatory from October 2008”. 

The meeting decided to produce ethanol directly from sugarcane juice, Pawar said. However, a formal decision would be taken by the Union Cabinet and it would happen soon, he added.

At present, five per cent blending of ethanol, produced from molasses, with petrol is allowed but it is not mandatory.

The minister also asked the state governments to remove hurdles in the movement of ethanol and avoid imposition of sales tax. The government planned to include denatured ethanol in the list of special goods under the Central Sales Tax Act 1956, he said.

Sugar mills have been urging the Centre to make mixing of 10 per cent ethanol with petrol mandatory. In view of the increase in sugarcane production and crashing price of sugar in the international market, sugar factories have been refusing to crush sugar due to high cane price.

According to sources, if mixing of ethanol with petrol is made compulsory, it would help mills earn extra revenue and also clear farmers’ dues.

According to estimates, sugar mills in the country owe over Rs 3800 crore in dues to farmers for their cane supplies.