Government Defends E20 Petrol Economics Amid Cost Debate
The petroleum ministry says ethanol blending currently costs more at prevailing crude prices but has saved over ₹1.9 lakh crore in foreign exchange since inception
Synopsis
: At current crude oil prices around $70 per barrel, E20 petrol costs more to produce than pure petrol and the ethanol blending programme has saved foreign exchange worth more than ₹1.9 lakh crore and monetised over ₹1.6 lakh crore for farmers since its introduction, according to the Ministry of Petroleum and Natural Gas .
Shareholders' responses to the persistent consumer question highlighted in the post
India has met its goal of providing 20 per cent ethanol-blended petrol across the country, and one common feeling that yet remains unanswered is that the fuel is not being rendered cheaper with the increase in ethanol.
The Ministry of Petroleum and Natural Gas responded to this on Friday by providing an extensive list of FAQs, laying out that "ethanol blending is not a measure to bring down petrol prices on a particular day but it is a measure to reduce dependence on imported crude and to protect consumers from global price fluctuations.
The Crude Price Threshold refers to the threshold price for crude oil
The ministry provided an accurate description of the fundamental economics. At US$70 or so per barrel internationally, E20 would be even more expensive to produce than pure petrol, the ministry said, but if the price of crude increased to US$120-130 per barrel, the economics would work in favour of ethanol.
Why Ethanol Prices Aren't Floating
The government's rationale is on the remunerative price at which ethanol is being purchased: "The Government pays Indian farmers a remunerative price for ethanol based on maize, which is about ₹71.86 per litre (excluding the goods and service tax (GST), transportation and handling and storage charges at deposits).
Today, almost one-fifth of all petrol sold in India is made from domestically produced ethanol, bought at a fixed price and not at any price that fluctuates with the international dynamics of crude oil markets.
The Ministry of the Nation's Debate
The ministry said the real issue is, 'How did India manage to shield consumers from the international price volatility of crude oil by procuring ethanol from domestic sources?
Cumulative Gains Since Launch
The Ethanol Blended Petrol Programme has already resulted in the saving of foreign exchange worth more than ₹1.97 trillion, as well as the replacement of 316 lakh metric tonnes of crude oil, the reduction of around 952 lakh metric tonnes of carbon dioxide emissions and the transfer of more than ₹1.66 trillion to the farmers.
Finding Solutions to Engine Safety Issues
The FAQ release follows two days after the government and auto makers together denied allegation that E20 fuel causes engine damage or substantial loss of mileage, during a press conference, the automakers said they had conducted years of testing and validation in the field, and found no evidence of engine damage or abnormal wear on compatible vehicles.
Looking Ahead
The ministry said there is increase in energy security with continued ethanol blending as it will further help in crude oil import reduction, reduction in foreign exchange outgo, fuel price stability and farmer's incomes.