After meeting with state government officials on Wednesday, India’s farm minister Sharad Pawar has announced that an agreement has been reached where by October 2008, there will be a mandatory 10 percent blending of ethanol with petrol. The state governments are also in support of moving towards deregulating Indian sugar mills and allowing them to directly produce the ethanol from sugarcane juice.
India now allows a five percent mixing of molasses-derived ethanol with petrol and the new agreement will double this figure. In addition, Pawar said that any obstacles to the free movement of denatured ethanol and local taxes should be eliminated.
Sugar production is one of the few remaining industries still under state control, with fixed prices that mills must pay to sugarcane growers. The government also determines the policy on creating new mills.
And now, sugar mills are facing a situation where there will be a surplus of 11.9 million tons at the beginning of the growing season this month, though domestic and international prices are not likely to increase. India has great potential for ethanol production, but so far, some of the complicated taxes that states impose have kept sugar mills from investing in biofuel production.
"The answer to the cyclic problem faced by the Indian sugar industry probably lies in conversion of surplus sugarcane directly into ethanol," Pawar said, adding that ethanol production should be controlled so as to not affect sugar output.