Petrol Stop - GoM-set price on ethanol ignores Bajaj offer

GoM-set price on ethanol ignores Bajaj offer

Tuesday, 03 August 2010

04 August 2010;business-standard.com:Ajay Modi:New Delhi: Sets interim level of Rs 27/lt, expert panel to work out a formula. The group of ministers (GoM) on the ethanol-petrol blending programme has fixed an interim price of Rs 27 per litre for ethanol to be used, a reiteration of the level it had fixed earlier. This is despite an offer by the country’s largest sugar company, Bajaj Hindusthan, to sell it at about Rs 25 per litre. In a letter dated July 22, Bajaj Hindusthan, also the largest ethanol supplier in seven states, wrote to Union petroleum secretary S Sundareshan, requesting the ethanol-petrol blending programme begin at the earliest. “In our opinion, to start with, you can start the programme at ‘Benchmark’ price, inflation-adjusted over and above the last contract price (of Rs 21.50 per litre)”, the letter said. Wholesale price index inflation in 2007-08, 2008-09 and 2009-10 was 4.60, 8.43 and 3.84 per cent, respectively. After adjusting this into the 2006 ethanol price of Rs 21.50, the price works out to Rs 25.33. On July 26, the GoM, chaired by Finance Minister Pranab Mukherjee, fixed the Rs 27 interim price and decided a committee headed by Planning Commission member Saumitra Chaudhuri would propose a pricing formula and recommend a price to be finally approved by the Cabinet. The interim price of Rs 27 will then be adjusted. The formula will take into account the dynamics of sugarcane and petrol prices. Apart from Mukherjee, the other group members who attended the meeting were food and agriculture minister Sharad Pawar, petroleum minister Murli Deora, heavy industries minister Vilasrao Desmukh and new and renewable energy minister Farooq Abdullah. Ethanol blending with petrol at five per cent continued for about two years before coming to a halt in October last year due to low supply. During this period, the oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — bought ethanol from sugar companies at a price of Rs 21.50 per litre. An earlier meeting of the GoM in April this year had fixed a price of Rs 27 per litre for ethanol. However, due to reservations expressed by chemicals minister M K Azhagiri, another meeting of the GoM was convened last week. The GoM, Azhagiri said in a letter to the finance minister in April, should reconcile the differences between various stakeholder ministries on the issue and not decide on the price of the commodity. Accordingly, another meeting of the GoM was convened. The two primary consumers of molasses-based alcohol (which is further processed to make ethanol) are the potable liquor sector and chemical producers. The chemical industry had been opposing the mandatory nature of blending and a fixed price of Rs 27. In spite of the opposition by the chemicals ministry and the offer by Bajaj, the GoM reaffirmed the Rs 27 per litre price. The sugar industry, which is the main producer of ethanol, had been all along lobbying for a price increase from Rs 21.50 per litre (for the supplies made between the years 2006-09) to Rs 27 per litre through its apex body, the Indian Sugar Mills Association. Bajaj Hindusthan is not a member.