Ethanol – a saviour that gives savings

Source– The post is based on the article “Ethanol – a saviour that gives savings” published in the “The Indian Express” on 22nd September 2023.

Syllabus: GS3- Indian Economy – Energy

News– The article explains the case of ethanol blending in India

Why are biofuels the need of the day?

Global crude oil prices are on the rise again. It is near the $100 per barrel mark. India’s reliance on crude oil and related products for imports reached 87.3% in FY2023. It constitutes 25.8% of the nation’s total import expenditure.

India has the world’s third-largest demand for crude oil and its derivatives. There is substantial potential for further growth in consumption.

Data from the International Energy Agency indicates that over the past decade, as much as 20 percent of India’s overall primary energy supply has been derived from biomass.

What are efforts made by the government for promoting ethanol blending?

India initiated its ethanol blending program in 2003. However, progress was limited for more than a decade.

In 2022, India’s blending program achieved a significant milestone by reaching 10 percent ethanol blending in petrol.

Plans are to increase the blending ratio to 20 percent (E20) by the fiscal year 2025-26. In 2022, ethanol producers supplied nearly 430 crore litres of ethanol.

What are the challenges in case of ethanol blending?

Approximately 60 percent of India’s petrol demand is attributed to two-wheelers. The remaining 40 percent comes from four-wheelers.

In a 2021 study focused on urban India by the Council on Energy, Environment, and Water, nearly 55 percent of respondents expressed a desire and need to own a four-wheeler.

A report from NITI Aayog also predicted a 45 percent growth in petrol demand by 2030 compared to 2021. In such a scenario, blending alone can only achieve a minor reduction in overall petrol demand.

Most of India’s ethanol supply for the blending program is derived from first-generation production, utilizing sugars from food crops.

Investments have been slow in case of second-generation (2G) ethanol production technologies. There are 12 such facilities in various stages of planning and construction, but they are unlikely to contribute significantly to the demand for ethanol.

The cultivation of food crops relies on fertilisers and water. It requires heavily subsidised energy, such as natural gas and electricity, for production.

Climate change concerns suggest that both rainfall and crop yields will experience significant variations. It will make  India vulnerable to supply disruptions.

What is the way forward?

India needs a well-defined research and development strategy for second-generation (2G) technologies before scaling up ethanol production.

The primary policy focus should be on slowing down overall petrol consumption in the economy and addressing private demand for petrol.

A targeted promotion of electric vehicles in public transportation and pricing mechanisms for the use of private vehicles in urban areas could facilitate the transition to higher levels of biofuels.

Investments and the capacity is needed to allocate the necessary raw materials for domestic ethanol production.

Biofuels and flex-fuel vehicles, which can primarily run on biofuels, need to be considered.