Date:19/02/2007 URL: http://www.thehindubusinessline.com/2007/02/19/stories/2007021904340100.htm

Back Oil marketing cos blame State Govts for stalling ethanol programme

Richa Mishra
Harish Damodaran

High taxes, curbs on inter-State movement remain bugbears

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New Delhi Feb 18 Nearly five months after issuing nationwide tenders for procuring about 55 crore litres of ethanol from sugar mills, the oil marketing companies (OMCs) are still finding it tough to implement the ethanol-blended petrol programme.

The public sector OMCs are blaming the State Governments for the programme not taking off as per schedule.

OMC sources said that the tenders have been so far finalised only in Uttar Pradesh, Delhi, Bihar, Jharkhand, Goa, Karnataka, Tamil Nadu and parts of Andhra Pradesh and Maharashtra.

Tenders have not been finalised for Haryana, Punjab, Himachal Pradesh, Rajasthan, Orissa, Gujarat, Madhya Pradesh and Chhattisgarh.

The OMCs are attributing non-finalisation to very high taxes and levy on ethanol imposed by these States, which render the programme commercially unviable.

They are taxing not only the end product but the input too, the sources said.

Besides, West Bengal and Kerala are yet to even notify the applicable taxes and levies on ethanol supplies for the programme.

The main grouse of the oil companies is that the States have been imposing several licensing and procedural requirements, levying a plethora of taxes and restricting inter-State movement of industrial alcohol.

This is despite several court rulings having limited the role of the State Governments to potable alcohol.

Industrial alcohol, including ethanol, should not be subjected to excessive State Government involvement, the oil companies have said.

The Ministry had, in September last year, issued a notification making it mandatory to cover the entire country under the five per cent ethanol blended petrol programme from November 1, barring the North-East, Jammu & Kashmir, Lakshwadeep and the Andaman and Nicobar Islands.

In the States where the programme has been finalised, the OMCs are procuring at an ex-distillery price of Rs 21.50 a litre.

The end price of the ethanol blended petrol is not expected to exceed the current cost of petrol, failing which the oil companies would be forced to incur the entire input cost, sources said.