Petrol prices may go up by Rs 5/litre

Ethanol to push rates to new high

Petrol prices may go up  by  Rs 5/litre

Petrol prices may go up by more than Rs 5 per litre if the government resorts to import ethanol to meet the June 30 Cabinet committee deadline for blending 5 per cent of the alcohol with the fuel.

Since the domestic production of ethanol is not sufficient to meet the requirement of mandatory blending across the country, the government is left with two options: Either import it, which will result in a sharp surge in petrol prices, or extend the deadline for the implementation of the programme.

In November 2012, the Cabinet Committee on Economic Affairs approved mandatory blending of 5 per cent ethanol with petrol. This was subsequently notified by the Centre under the Motor Spirits Act, which states that oil marketing companies (OMCs) have to mix 5 per cent of ethanol content in petrol by June 30 this year.

India needs close to 1,050 million litres of ethanol for mandatory blending. Industry sources, however, said only 30 per cent of the total quantity is available now and the rest will have to be imported. The cost of imported ethanol, at the same time, is more than double of Rs 40-42 per litre that domestic suppliers have quoted.

Sources said most of the foreign suppliers have quoted ethanol prices at Rs 70-90 a litre. If the OMCs decide to buy ethanol at such prices, the cost of petrol will go up by over Rs 5 per litre, a risk that the Centre cannot afford to take if it wants to avoid strong protests from opposition parties over the fuel prices that affect the common man.

Hence, the government plans to float fresh tenders for supply of ethanol and OMCs will have to resort to fresh negotiations with the distillers to ensure greater supply.

Sugar mills have said they are ready to supply close to 500 million litres of ethanol if a supplementary tender is floated as cane crushing for this season will begin in October. The Indian Sugar Mills Association has estimated that ethanol production in the current season will be 500 million litres.

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