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Economy
Pradeep Kumar

08/03/21 15:08 PM IST

Ethanol turns cheaper than petrol

In news

Oil marketing companies (OMC) are set to procure 283 crore litres of ethanol from mills for blending up to 10% with petrol in 2020-21 (December-November)

Ethanol production
  • This is against 167 crore, 179 crore and 150.5 crore litres in the preceding three supply years and a mere 38 crore litres in 2013-14.
  • Moreover, out of the 283 crore litres, only 59.7 crore comprises ethanol normally produced by mills from ‘C’ molasses, the leftover cane syrup after most of the sugar has been extracted and crystallised.
  • The balance supply would be ethanol from fermentation of whole sugarcane juice (42.2 crore litres) and the intermediate ‘B-heavy’ stage molasses (181 crore litres).
Taxes on ethanol
  • Ethanol, used for blending with petrol and containing 99.5% alcohol, is chargeable to only a 5% goods and services tax (GST). 
  • the 5% GST on ethanol, slashed from 18% in July 2018, has notional value. 
  • The absence of any substantive tax advantage notwithstanding, India’s ethanol production capacity has doubled from 215 crore litres in 2014-15 to 426.6 crore litres in 2019-20.
Way forward
  • The higher ethanol prices – and a government proposal to bring forward the 20% blending target to 2025 – has enthused other big millers too.
  • The Indian Sugar Mills Association has estimated diversion of 20.10 lt sugar for ethanol production from ‘B-heavy’ molasses and cane juice in the 2020-21 season.
  • Besides being an indigenous green fuel, ethanol will help mills make timely payments to cane farmers.
  • The present programme can be accelerated by increasing the blending mandate in major ethanol-producing states and promoting production from direct cane juice.
Source: Indian Express

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