Centre gets oil firms to revive sugar mills | mumbai | Hindustan Times
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Centre gets oil firms to revive sugar mills

The Centre has decided to give a leg up to Maharashtra’s troubled cooperative sugar industry.

mumbai Updated: Apr 08, 2010 01:04 IST
Ketaki Ghoge

The Centre has decided to give a leg up to Maharashtra’s troubled cooperative sugar industry.

A group of ministers (GoM), headed by Finance Minister Pranab Mukherjee, decided on Tuesday that oil firms must buy ethanol at Rs 27 a litre from sugar mills. This is 25 per cent more than the current Rs 21.5. Ethanol is a by-product of sugar molasses that is mixed with petrol.

Vilasrao Deshmukh, Union minister for heavy industries and a member of the GoM, said the decision was taken on Tuesday and will be forwarded to the Cabinet.

“We decided that ethanol price should be hiked from Rs 21.5 to Rs 27 a litre. The oil companies will also have to bear the transport cost,” Deshmukh said. “Five per cent blending [of ethanol with petrol] will be mandatory and this will be raised to 10 per cent as ethanol production goes up.”

The decision will benefit sugarcane farmers and factories being run mostly by Congress-NCP leaders in Maharashtra, but it’s unlikely to go down well with the state-owned oil companies that are already reeling under losses because of fuel subsidies. Brij Mohan Bansal, chairman, Indian Oil Corporation, said: “This move will impact oil companies.” An official with an oil firm said: “The recent hike in petrol prices will ensure the net realisation for oil firms goes up even if ethanol prices rise.”

Maharashtra’s 160-odd cooperative sugar factories, which form the backbone of the rural economy in those areas and help political parties wield power, are doing poorly because of trade fluctuations, errant monsoons and mismanagement.

The five-member GoM - including Deshmukh and Agriculture Minister Sharad Pawar, who are part of Maharashtra’s powerful sugar lobby, petroleum minister Murli Deora, chemical and fertiliser minister M.K. Azhagiri - was set up in March to resolve differences over mixing of ethanol into petrol. “We will support any project that benefits farmers and oil companies,” Deora said.