News: Indian cars ready for ethanol, supply tight

(FE 28/05/2006) New Delhi - Automakers in India will not need to make changes to the engines and fuel systems of cars and two-wheelers for fuel blended with up to 15% ethanol, setting at rest fears of cost escalation of vehicles on account of the government’s decision to make 5% ethanol blending mandatory with petrol in all states by the next sugar season.

The only constraint to a shift to ethanol-blended fuel is likely to be supply of the spirit from sugar manufacturers who find ready takers for the produce among distillers. The country has a capacity to make 80 million litres of alcohol annually, expected to rise to 200 million next year.

In contrast, at a 5% blend mandated in petrol sales across the county, ethanol demand is expected to be 600 million litres. Ethanol is a purer form of alcohol created by dehydrating rectified spirit.

Car industry sources said, unlike the change from leaded to unleaded petrol or the change in emission norms, engines need not be tinkered to accommodate this change. “Our engines are capable of meeting E15 (ethanol blend of 15%) requirement. So, this move wouldn’t impact us,” said Masahiro Takedagawa, president and CEO of Honda Siel Cars India.

“It is a eco-friendly step and we welcome it. We are also prepared for it since no technical changes need to be made,” said KK Swamy, deputy managing director of Toyota Kirloskar Motors Ltd.

Most of the carmakers in India have experience running their vehicles on ethanol-blended petrol given that such blending has been the norm in several other markets like the US, Thailand and Brazil for some time now. In Brazil, for instance, two-fifths of vehicles run on 100% ethanol while the rest use a 24% blend.

In 2003, the centre had announced it was making the blending of 5% ethanol with petrol mandatory in nine notified states and four notified union territories adjoining these states from January 1, 2004. That plan, however, didn’t take off since the industry wasn’t producing enough ethanol then, mainly due to 21% drop in sugarcane production in between 2001-02 to 2004-05.

Another stumbling block will be the price set by the government for ethanol offtake. At Rs 18.75 per litre, a 5% ethanol blend would reduce the retail price of petrol by Re 1. But oil companies, already suffering from huge losses due to administered prices, are demanding a much lower price. The success of the programme depends on how the government is able to broker a deal between these two industries.