NEW DELHI: Petrol could become costlier by about 4 a litre if the government compels oil firms to sell 5% ethanol-blended petrol across the country by next month as these companies would be forced to import huge quantities of the biofuel at exorbitant rates.
But, the Cabinet, which will meet soon to discuss the issue, may relax compulsory doping as it would want petrol prices to rise sharply, months before the announcement of general elections, government and industry officials said. Last November, the Cabinet had made sale of 5% ethanol blended petrol mandatory by June, and freed oil companies to negotiate price with domestic and overseas suppliers of the biofuel.
It is also expected that fuel retailers will raise petrol prices by at least 1 per litre by the end of this month because of rising oil prices in international markets and depreciation of the rupee against the dollar.
"The issue will be re-examined by the Cabinet soon in the light of new facts," a government official said. The oil ministry has circulated a Cabinet note earlier this month on compulsory blending of ethanol with petrol, highlighting the fact that this would force oil companies to import over two-third of 105 crore litres of the biofuel at higher rates, officials said.
"The Cabinet will take a final call - whether it would allow a sharp increase in petrol prices to save the environment or defer the move to spare the consumer," one official with direct knowledge of the matter said.
Ethanol is a by-product of sugarcane, and blended with petrol, it will help reduce the oil bill of the country as well as cut carbon dioxide and carbon monoxide emissions by around 15%.
India needs about 105 crore litres of ethanol for the 5% mandatory blending. But oil companies could secure less than one-third of this from domestic sources, which is in the price band of 38-45 per litre. The rest of ethanol has to be imported at about 70-91 per litre, costlier than petrol, officials added.
It has been a decade now that the government could not implement its ethanol-blended petrol plan in the entire country because of supply and pricing issues. Earlier, the government had decided to make 5% doping mandatory from October 2007 and 10% optional from October 2008, subject to availability of the biofuel, but the plan achieved little success.
Executives in Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan PetroleumBSE 1.28 % Corp Ltd ( HPCLBSE 1.28 %) say that there's no commercial sense to dope costly ethanol in petrol. "We will abide by the government's decision, but we have to rely on costly imports of ethanol, which would mean consumers will have to bear the price burden," an IOCBSE 0.76 % executive said.
Last month, state oil firms had purchased about 10 crore litres of ethanol from domestic sugar mills at an average price of 42 a litre, which was significantly higher than the government-fixed rate of 27 four years ago. "But imported ethanol is uneconomical without raising fuel cost," a BPCLBSE 1.26 % executive said.
Source:-economictimes.indiatimes.com
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