Govt backs down on ethanol blended petrol programme

14 September 2006

The government will not make the 5 per cent ethanol blended petrol programme mandatory from November this year as had been expected. CNBC-TV18 reports that this is bad news for sugar companies like Bajaj Hindustan, which expanded capacity in anticipation of compulsory blending.

This is some sobering news for sugar stocks that have been on a high since the government announced its decision to press ahead with the ethanol blended petrol programme from November. High level officials have said that the move will not be made mandatory.

At a recent meeting at the prime minister's office, the oil ministry argued that since there are competing demands on ethanol supply by portable alcohol and chemical industries, prices of ethanol will shoot up if the programme is made mandatory.

Moreover, PSU oil firms will also be given freedom to protect their commercial interests at arriving at a viable ethanol pricing.

Sugar companies like Bajaj Hindustan, Shree Renuka Sugar, Balrampur Chini have all expanded capacity in anticipation of ethanol blending being made mandatory.

And if that is not a dampener enough, Brazilian oil giant Petrobras has offered a long- term ethanol supply agreement.