Sops on ethanol import to help green fuel: Plan panel

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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 utilised 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 a 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 organised 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 uncertainty 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.