New Delhi: The commerce ministry has turned down a request by the US to reduce the import duty on de-natured ethanol entering the country to protect the domestic sugar and potable industry, as well as farmers, two senior government officials said.
Not just farmers, even state governments would have suffered due to a reduction in import duty on ethanol from the US, as they earn revenue by levying excise duty on sale of potable alcohol, one of the officials said.
The government has been encouraging sugar mills to produce ethanol over sugar to reduce the glut in the sugar market, and a reduction in duty would discourage mills from producing the bio-fuel.
Ethanol from the US entering India attracts 150% import duty.
"...allowing import of ethanol at reduced rate would defeat the rationale behind the move of the government. It may also have an adverse sentimental effect on the investors who have invested or (are) willing to invest in setting up new distilleries who may drop their plans to augment their capacity and some may also close their projects mid-way," one of the officials said.
Distilleries consume raw materials produced by Indian farmers and if they are closed down, it would have a direct impact on farmers of foodgrain and cane.
Any reduction in the import duty structure on ethanol from the US would also affect banks, as they have provided loans for projects to set up new distilleries.
In a slew of measures to boost production and encourage mills to produce ethanol, the Centre raised prices at which sugar mills sold the biofuel to oil marketing companies and also allowed mills to directly derive ethanol from sugar syrup.
It also provided soft loans to mills to set up new ethanol distilleries, expand capacity and upgrade existing distilleries to encourage mills to divert sugarcane to ethanol.
For 2019-20 (Dec-Nov), oil marketing companies have already floated a tender to purchase 5.11 bln ltr of anhydrous denatured ethanol from sugar mills.
Ethanol is not just made from sugar, cane juice and molasses, but also from corn, rice, sorghum and wheat, and the government has been looking at ways to divert excess rice available in the central pool for production of ethanol.
"The price of ethanol derived from maize is currently at 75 rupees a ltr, while the US product would have cost 83 rupees a ltr at 150% duty. If the duty is reduced, the imported product would have hit the domestic market adversely," another official said.
