New Delhi, March 3: Falling sugar output is taking a toll on the country’s bio-fuel programme.

The heat is on the mandatory blending of petrol with 5 per cent ethanol — obtained from sugar — with the petroleum ministry urging a rethink given a 39 per cent slump in sugar output.

The country is expected to produce 16.5 million tonnes of sugar this season starting October 2008, down from about 26.4 million tonnes in 2007-08.

Analysts said this might force India — the largest sugar consumer — to import 1.5 million tonnes of the sweetener. Two years of bumper production have resulted in a 25 per cent decline in acreage.

The petroleum ministry has sought the views of other ministries on the possibility of making the 5-per-cent rule optional.

A cabinet decision to raise the blending limit to 10 per cent from October has not been implemented.

“Even the 5 per cent programme has not yet stabilised. If blending is to be raised to 10 per cent across the country, the availability of sufficient ethanol has to be ensured,” Dinsha Patel, minister of state for petroleum and natural gas, said.

Questions on the economic viability of the programme at a time when global crude prices are low have been raised.

A suggestion to buy ethanol at pre-determined prices is opposed by the officials of the oil ministry. The practice of open tender on the basis of the guidelines prepared by the Central Vigilance Commission should be maintained, the officials said.