Bottlenecks aplenty

The deadline for completing the project to blend 5 per cent ethanol with petrol has been extended by three months to September 30. The programme was to be implemented by the Union government in nine states and four union territories. Union minister for petroleum and natural gas Ram Naik justified the move, citing delays in the setting up of production infrastructure for anhydrous ethanol.

Naik is, however, confident of a nationwide implementation of the ethanol-blended programme by the end of 2004. Whether that can be achieved remains to be seen, because infrastructure is not the only issue dogging the gasohol project.

The objections being raised by the sugar industry are also going to be difficult to handle. The industry is irked by the petroleum ministry's move to set up a tariff commission to determine an "appropriate price" for ethanol being procured by domestic refineries. The oil sector feels that it is paying too much for ethanol -- a claim rubbished by ethanol producers (sugar/distillery units).

Currently, the bill that oil companies foot for purchasing ethanol varies from state to state due to local levies. Generally, the price hovers around Rs 17.50 per litre. The problem is that the government is trying to keep the price of the final product (ethanol) in check, while that of the raw material (molasses) is not controlled.