The government is reviewing the previous NDA regime's ambitious programme to run automobiles on ethanol-doped petrol, a project which was launched to cut the country's dependence on imported crude oil.

Petroleum minister Mani Shankar Aiyar said the review had been necessitated due to poor sugarcane crop limiting availability of molasses and leading to spike in ethanol price.

A new notification by the petroleum ministry does not make it mandatory for oil companies to blend ethanol with petrol.

Ethanol should be procured only if it is economical and does not impact the fuel price, it says.

This makes ethanol mixing optional and the oil industry, which has been uncomfortable about sourcing ethanol at high prices in the past six months, has dumped the exercise in most parts of the country.

"We have not scrapped the ethanol programme. But we have called for a review to look at relative price of petrol and ethanol in view of limited supplies of molasses," he said.

Ethanol prices have increased 100 per cent over the past year. Oil companies are still tendering for ethanol requirements, but few procurements are being made as prices are ruling at Rs 19-20 per litre.

Another disincentive is the withdrawal of Rs 350 per litre excise duty exemption for oil companies for ethanol-doped fuel. India had planned to cut its over $19 billion oil import bill by mixing ethanol in petrol.

But sugarcane (and ethanol) shortages have stalled the entire process. The 5 per cent mandatory blending of ethanol with petrol would have created demand for 3,600 lakh litres.