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Can India Follow Brazil ?

Findings & Observations of Mr. Deepak Desai on his visit to Brazil:

The Ministry of Petroleum & Natural Gas announced its decision to cover all the states in the country except north-eastern states for 5% ethanol blending from 1st October, 2006 & now have revised it to 1st November 2006.

In pursuance of the above there were lot of discussions & meetings between Oil Marketing Companies, ISMA (Indian Sugar Mill Association), NFCSF & All India Ethanol Manufacturing Association in terms of fixation of the price of ethanol. As there was no unanimous decision on both the parties, the matter was therefore taken up to the Secretary, Ministry of Petroleum for settlement.

With October 2006 approaching fast (now converted to 1st November 2006), in normal circumstances all issues relating to countrywide doping of ethanol at 5% should have being settled but still there is an ambiguity. What should be the price of ethanol? How the entire model will work?

The Cabinet Minister Mr. Murli Deora advised the oil Companies to float tenders instead of having a price negotiations, which was the same old usual process which was followed by the oil companies previously. So nothing new in it! But still the question remains what should be the price of ethanol? How the entire model will work?

I am giving my observations on my study tour to Brazil to explore the exact model of working implemented on the other side of hemisphere supported with few photographs. 

It was obvious that the same problem had been faced by the Brazilians as India is facing now. How did they solve this? I had in mind that for a complicated problem if the answer is not simple; the cause of the problems remains as it is.

Over the past three decades Brazil has worked to create a viable alternative to gasoline. With its sugarcane based fuel; the nation may become energy independent this year. It started in 1970’s in response to the uncertainties of the oil market, till now they have ensured a remarkable success.

70% of the new cars sold now, the Brazilians are driving “flexible fuel” cars that run on either ethanol or gasoline. It allows consumers to fill whichever is cheaper and off course ethanol is cheaper. Name any car company they are producing flexi fuel cars & hence selling it.

Secondly on all the 30,000 petrol pumps in Brazil the fuel issued is -

1st - Pure alcohol (95% purity) – ethanol

2nd – Gasoline with 25% ethanol mandatory by law

3rd – Gasoline with 25% of ethanol + additives (octane boosters)

Current prices - 

1. Pure alcohol (95% purity) – ethanol   = 1.35 R$ = 29.70 RS.

2. Gasoline with 25% ethanol mandatory by law  = 2.46 R$ = 54.12 RS.

3. Gasoline with 25% of ethanol + additives (octane boosters)= 2.56 R$ = 56.32 RS.

This reflects the success of the program.

The program in Brazil started as a revolution. The military & civilian leaders laid the groundwork by mandating ethanol use & dictating production levels. Work was going on all levels. The ethanol producers were forced to invest on technologies which have ultimately lower conversion costs. The government supported the sugar industry in giving subsidies to manufacture & to become more efficient in making the cost of ethanol low. With this government support sugar companies & auto makers local units delivered cost saving breakthroughs. “Flexible fuel” cars running on ethanol, gasoline or mixture of both have become a hit. Car buyer no longer have to worry about the fluctuating prices. They fill there vehicles according to their cost benefit analysis. Yes alcohol gives an average 9 to 10 KM/liter where petrol gives 12 KM/Liter. The consumer chooses as per his choice. This is the simple answer to which India should follow. Let the question of calorific value be decided by consumer & not oil marketing companies.

The oil companies should decide on the percentage of blend. The ethanol manufacturers should adopt low conversion cost technologies & provide alcohol. The consumers should decide on the mix. The Ministry like the Brazils Military leader Gen. Ernesto Geisel which ordered 10% ethanol blend mandatory & later 25% in next five years, which allowed Brazil to pay for fuel in local currency in the form of payments to farmers.

The Government gave sugar companies cut-rate loans to build ethanol plants & guaranteed prices for there product. So I think everyone should play there respective role effectively without intermixing the issues to make the program a success in India.

Observations of Deepak Desai on Brazilian trip on date 14th August to 23rd August 2006

Your comments & suggestions are welcome. You can interact with Mr. Deepak Desai on email - and Cell No. +91 (0) 9823139883.

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