New Delhi: The Planning Commission on Monday said the government should consider providing incentives to encourage companies to acquire sugarcane plantations abroad and bring ethanol into the country. This ethanol can then be utilized as an environment-friendly fuel alternative and also help reduce the country's oil import bill.Official sources said the incentives could include the reduction of import duty on industrial ethanol from 7.5% to 5%, which is the duty on petroleum products. In order to reduce the risks involving any fall in the market price of ethanol, the government may also enter into long-term contracts with oil companies to purchase ethanol at a certain minimum price in case of decline in price of the item, they said.
Also, the companies bringing ethanol into the country may be given carbon credits, the sources said. There is also a proposal to bring ethanol under the 'special goods' category and ensure that the tax structure on the product is uniform across the country.
Kirit S Parikh, member, Planning Commission, said on the sidelines of a function organized by CII that the Commission had recommended to the government to encourage companies to buy sugarcane plantations abroad, especially in countries like Brazil to produce ethanol and send it back to India. "Private firms can buy such assets (acquiring sugarcane plantation for producing ethanol) and the government can provide them incentives to do it. For instance, some tax concessions can be given. There is lesser uncertainly and more viability in such ventures than say the plans of OVL (ONGC Videsh Ltd) to acquire oil and gas fields abroad," he said.
The proposal follows the recent decision of oil marketing majors like Indian Oil, Bharat Petroleum and Hindustan Petroleum to defer their plans to invest over $600 million in sugarcane plantations in Brazil due to the losses they suffered in fuel retailing during the oil price rise last year. Also, the government had decided to pursue a programme to make it mandatory by October this year to blend 10% ethanol with petrol to be used by vehicles.
But the plan suffered a major setback due to the inadequate availability of sugar in the local market this year. In countries like Brazil, ethanol is made straight from fermentation of sugarcane juice, while in India, ethanol is made out of molasses, a by product in the manufacturing of sugar.
CLEAN ENERGY
. The Govt had decided to make it mandatory by October 2009 to blend 10% ethanol with petrol be used by vehicles.
. Sugar production has declined to 16.5 million tonne this year, against a demand of 23 million tonne, leaving title with the millers to pursue the 10% mandatory ethanol-blending programme.
. Incentives for ethanol import could include reduction of import duty on industrial ethanol from 7.5% to 5%.
. Govt to enter into long-term contracts with OMCs to purchase ethanol at a minimum price in case of a decline in price of the item
. Companies bringing ethanol into the country may be given carbon credit.
The country's sugarcane production has fallen from 348.19 million tonne in 2007-08 to 290.45 million tonne in 2008-09. Sugar production has also declined form 26.5 million tonne last year to 16.5 million tonne this year, leaving very little with the millers to pursue the government's ambitious 10% mandatory ethanol blending programme from October 2009. Already, the shortage has pushed up retail sugar prices by Rs.5 per kilogram in the last five months and could go up again because of falling supplies. Experts said the Planning commission's latest proposal is meant to give OMCs more leeway in procuring ethanol for blending, as local supplies won't be available in sufficient quantities for the next two years. However, the sugar industry sources feel that such measures to boost ethanol imports shouldn't be encouraged at the cost of the local industry.
"The policy to boost ethanol imports hardly makes any sense as it will be viable for the OMCs only if they procure locally produced ethanol. For this the government should first bring in a stable sugarcane policy, ensuring that farmers get higher returns. This would also encourage them to produce more sugar and the surplus can then be used for ethanol production," said SL Jain, Director General, Indian Sugar Millers Association.
- Arun S
(The Financial Express: 10.3.2009)
