Oil marketing companies together would have to make investments of a few hundred crores of rupees to create the facilities that would enable them to blend ethanol in petrol.
The cost that is being incurred in setting up the machinery at a single depot is about Rs 1 crore (Rs 10 million), according to an Indian Oil Corporation official.
IOC, which controls almost 55 per cent of the retail fuel market, is planning to have 140 ethanol blending points across the country. This translates into an investment of almost Rs 140 crore (Rs 1.4 billion).
Sources in Bharat Petroleum Corporation Limited said the company would invest about Rs 28-30 crore (Rs 280-300 million) in the 20 states where it will sell ethanol-blended petrol.
While Hindustan Petroleum Corporation Limited officials did not speak on this, it is likely that the company would have to make a similar kind of investment for the blending programme.
M S Srinivasan, Secretary in the ministry of petroleum and natural gas, said the ethanol blended petrol programme will be implemented successfully by the end of this calendar year.
"We are trying our best to ensure that the five per cent ethanol blended fuel initiative covers all the states", he said.
The ministry is not in favour of importing ethanol for the programme. We want to encourage the domestic producers, he said.
The programme has seen a bumpy ride so far with only three states (Uttar Pradesh, Tamil Nadu and Goa) being able to implement it. The ex-distillery price of ethanol has been finalised at Rs 21.50 per litre in these states.
The OMCs are keen on fixing the ex-distillery price of ethanol at Rs 21.50 in a uniform manner across the country. However, price negotiations in other states have not materialised.
High import fees and other levies imposed by certain states are impeding price finalisation. The ministry along with the oil marketing companies is trying to bring down the levies in these states.
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