Amendments to the National Policy on Biofuels – Explained, pointwise

Introduction

Ethanol, or ethyl alcohol, is a hydrocarbon that when burnt can generate heat and power engines. Since two decades, India has been moving towards putting in place an ecosystem to have more ethanol blended into petrol for use in vehicles, particularly 2- and 4-wheelers. Government records suggest about 75% of India’s 220 million vehicles are 2-wheelers and 12% are 4-wheelers. Another proactive step in this regard has been taken by the government by amending the National Policy on Biofuels, 2018. The amendment has advanced the date by which fuel companies have to increase the percentage of ethanol in petrol to 20%, from 2030 to 2025. The policy of introducing 20% ethanol is expected to take effect from April 1, 2023.

What has been the history of ethanol blending in India?

Since 2001, India has tested the feasibility of ethanol-blended petrol whereby 5% ethanol blended petrol or E5 (95% petrol-5% ethanol) was supplied to retail outlets. In 2002, India launched the Ethanol Blended Petrol (EBP) Programme and began selling 5% ethanol blended petrol in nine States and four Union Territories. It was extended to twenty States and four UTs in 2006.

In 2015, the Ministry of Road Transport and Highways notified that E5 petrol and the rubber and plastic components used in gasoline vehicles produced since 2008 be compatible with the E10 fuel. Since 2020, India has been announcing its intent to achieve 10% blending by the end of 2022 and 20% blending by 2030. The Centre has also targeted 5% blending of biodiesel with diesel by 2030. 

What is the current status of Ethanol Blending?

According to the Ministry of Petroleum and Natural Gas, the all India average blending stands at 9.90 (as of May 2022). Letters of Intent for supply of 468.56 crore litres of ethanol were issued at the start of this Ethanol Supply Year, out of which 415.88 crore litres has been contracted and 186.21 crore litres supplied so far. 

Ethanol derived from sugarcane juice/sugar syrup and from C heavy molasses forms the bulk of this supply, with that from surplus rice and damaged food grains being a distant second. Around 16 lakh tonnes of sugar was subsumed to produce this ethanol.

India’s current ethanol production capacity consists of 426 crore litres from molasses-based distilleries, and 258 crore litres from grain-based distilleries.

What has been the international experience?

Flex Fuel Engine technology (FFE), or vehicles that run entirely on ethanol, are popular in Brazil and comprise nearly 80% of the total number of new vehicles sold in 2019. The global production of fuel ethanol touched 110 billion litres in 2019, or about an average growth of 4% year per year during the last decade. 

The U.S. and Brazil make up 92 billion litres, or 84% of the global share, followed by the European Union (EU), China, India, Canada and Thailand.

What are the salient features of National Biofuel Policy 2018?

Introduced in 2018, the National Biofuel Policy is aimed at reducing dependence on imports by encouraging fuel blending. 

The Policy categorizes biofuels as – (a) “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and (b) “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc..

The Policy expands the scope of raw material for ethanol production by allowing use of – (a) Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum; (b) Starch containing materials like Corn, Cassava; (c) Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.

With a thrust on Advanced Biofuels, the National Policy on Biofuels indicates a viability gap funding scheme for 2G ethanol Bio refineries of INR 5,000 crore in 6 years. The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil, and short gestation crops. The National Biofuel Coordination Committee (NBCC), with the Union Minister for Petroleum and Natural Gas as its head, is the agency to coordinate this blending programme.

What are the recent amendments to the National Policy on Biofuels?

The most important amendment has been advancing the 20% blending date by five years from Ethanol Supply Year (ESY) 2030 to 2025-26. 

There has been an introduction of more feedstock for production of biofuels. Further,  production of biofuels under the ‘Make in India’ programme in Special Economic Zones (SEZs), Export Oriented Units (EOUs); and permission to allow export of biofuels in specific cases are some other changes. Apart from addition of new members to the NBCC, the Committee has now been given the permission to change the policy which it earlier lacked.

What is the significance of adopting Ethanol Blending of Fuel?

Reduce Import Bill:  As per a NITI Aayog Committee report of June 2021, India’s net import of petroleum was 185 million tons at a cost of US$ 55 billion in 2020-21. Most of the petroleum is used by vehicles. A successful 20% ethanol blending programme could save the country US$4 billion per annum, or about INR 30,000 crore.

Environment Benefits: Ethanol burns more completely than petrol, it avoids emissions such as carbon monoxide. One crore liters of E-10 saves around 20,000 ton of CO2 emissions.

Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.

MSW Management: It is estimated that, annually 62 MMT of Municipal Solid Waste gets generated in India. There are technologies available which can convert waste/plastic, MSW to drop-in fuels. One ton of such waste has the potential to provide around 20% of drop-in fuels. (Drop-in fuels are the fuels that can be used without major change in infrastructure. Ethanol blended petrol is a drop-in fuel).

What are the challenges associated with Ethanol blending?

Efficiency: It takes much more ethanol to power a vehicle’s engine than petrol, therefore blending leads to a loss of efficiency. For instance, when using E20, there is an estimated loss of 6-7% fuel efficiency for 4-wheelers which are originally designed for E0 and calibrated for E10, 3-4% for 2-wheelers designed for E0 and calibrated for E10. 

Harmful Residual Products: It also leaves residual by-products that can corrode and damage the vehicle. 

Environmental concerns: On average, a ton of sugarcane can produce 100 kg of sugar and 70 litres of ethanol but that would mean 1,600 to 2,000 litres of water to produce 1 kg of sugar. This implies that a litre of ethanol from sugar requires about 2,860 litres of water.

Further, tests conducted in India have shown that there is no reduction in nitrous oxides, one of the major environmental pollutants.

Is the new target achievable?

Arguments in Favor:

First, the committee report estimates that adoption of electric vehicles should partially offset demand for ethanol leading to a lesser requirement of 722-921 crore litres in 2025.

Second, the test vehicles using E20 fuel worked well in trials as per the committee report. There was not much reduction in performance and capability which should encourage its adoption.

Arguments against:

Poor Implementation: The 5% blending was started in 2002 and considerably expanded to various states and UTs in 2006. However, the proportion has remained low. e.g., the proportion of blending was 1.5% in 2013-14.

High Prices: The prices of ethanol produced in India are higher compared to the U.S. and Brazil, because of the minimum support prices that the government provides. The cost of flex fuel vehicles (4-wheelers) could cost about ₹17,000 to ₹25,000 more than the current generation of vehicles. The 2-wheeled flex fuel vehicles would be costlier by ₹5,000 to ₹12,000 compared to regular petrol vehicles.

Lack of Supply: Various experts have said that in order to achieve 20% blending, India would require a consistent supply of 1,500 crores litres of ethanol annually. This is way beyond the current production capacity.

Fund Crunch: Many cooperative sugar mills have complained about a fund crunch as banks are reluctant to finance them given their weak balance-sheets.

What lies ahead?

First, vehicles that run on ethanol need to be tuned accordingly so that they don’t compromise on efficiency and usability.

Second, to compensate the consumers for a drop in efficiency from ethanol blended fuels, tax incentives on E10 and E20 fuel may be considered. 

Third, a report by the Institute for Energy Economics and Financial Analysis (IEEFA) says that for India to meet its target, it will need to bring in additional 30,000 sq. km of land under maize cultivation. Further, half of this land can be used to produce clean electricity from solar energy.

Fourth, in order to tackle the fund crunch, mills have asked for tripartite agreements between Oil Marketing Companies (OMCs), banks and cane suppliers to clear payments within 21 days.

Conclusion

The amended policy is expected to yield economic as well as environmental benefits. However, to realize the benefits, the policy must be implemented effectively and the prevailing bottlenecks should be removed.

Source: Indian Express, The Hindu