Recently, the government has decided to lift all the restrictions on ethanol production from sugarcane juice, sugar syrup, and molasses for the year 2025-26. The decision demonstrates the government’s commitment to achieve the target of 20% ethanol blending in petrol by 2025, with potential expansion to 30% thereafter. However, there are certain challenges that have been cropped up especially like the complaints by the users regarding the reduction in the performance of their vehicle due to the usage of ethanol blended fuel. In this regarded let us examine the significance & challenges of the ethanol blending programme of the government.
What is the Ethanol Blending Programme? What is the Status of the targets?
Ethanol Blending Programme:
- The Ethanol Blended Petrol (EBP) program was launched in January 2003. The program seeks to achieve blending of Ethanol with petrol with a view to reduce pollution, conserve foreign exchange and increase value addition in the sugar industry enabling them to clear cane price arrears of farmers.
- As per the programme targets, India has to achieve 10% blending rate (E10) by 2021-22 and 20% blending rate (E20) by 2025-26.
Sources of Bio Ethanol Production in India:
| Sugarcane | Sugarcane gives rise to three main related products, in the order of decreasing sugar content. a. Sugarcane juice and syrup b. B-heavy molasses c. C-heavy molasses (Sugarcane juice and syrup, and B-heavy molasses typically go into making sugar, as they have higher sugar content.) In a bid to up the ethanol production, the government had started permitting the diversion of Sugarcane juice and syrup, and B-heavy molasses. However, in December 2023, the government restricted the diversion of Sugarcane juice, syrup, and B-heavy molasses, over fears of falling sugar stocks. |
| Maize | The use of maize for ethanol blending has been increasing to produce more fuel ethanol to compensate for restrictions on using Sugarcane juice, syrup, and B-heavy molasses. |
| Surplus rice & damaged grains | Surplus rice and damaged grains have been permitted by the government for use as a feed in grain-based distilleries. |
What is the significance of Ethanol Blending Programme?
1. Bolsters India’s Energy security: India has a high dependence on imported fuel to meet its energy needs. India has over 87% crude oil import dependence. Such high import dependence, makes India’s energy security vulnerable to global events like the Russia-Ukraine war or oil-cut decisions of OPEC countries. Ethanol blending programme reduces India’s dependence on imported oil, and in turn bolsters the energy security.
2. Import Substitution: Ethanol blending can help in strategically reducing the dependence on imported fossil fuels and conserve foreign exchange reserves. As blending levels rise, India conserves substantial foreign exchange—over ₹1.4 lakh crore saved in the last decade—and substantially lowers its annual import bill. For E20 (20% ethanol), the annual savings are projected at $4 billion, directly improving the current account balance.
3. Reduction of emissions: Ethanol-blended fuels significantly reduce CO2 emissions, carbon monoxide, hydrocarbons, and particulate matter compared to pure petrol. As per NITI Aayog, petrol blended with 20% ethanol would reduce carbon monoxide emissions by 50% in two-wheelers and 30% in four-wheelers.
4. Bolstering Rural Economy and Farmer’s Income: It bolsters the rural economy by promoting the cultivation of various crops (like maize, paddy) through an assured market. Under Ethanol Blending Program, Oil Marketing Companies (OMCs) have paid sugar mills nearly Rs 81,796 crore for ethanol supplies in the last seven years (till 2022), which has helped mills to clear farmers’ dues.
5. Job Creation: As per the Asian Development Bank (ADB), the ethanol blending programme can help in generating about 18 million rural jobs in India.
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What are the Challenges to Ethanol Blending Programme in India?
- Engine Compatibility: While most new cars are E20 compliant, older vehicles may not be. Using higher blends of ethanol in incompatible engines can damage engine components and fuel systems, raising concerns for consumers.
- Lower Energy Density: Ethanol has lower calorific value than petrol, resulting in decreased fuel mileage with higher blends.
- Dispensing Infrastructure: Petrol stations need to be equipped with the necessary infrastructure to store and dispense ethanol-blended fuels. The capital investment required for this upgrade is a challenge for many station owners.
- Financial vulnerability of Sugar Mills: The lack of financial stability of the sugar mills to invest in biofuel plants, and their heavy concentration in certain regions, poses a significant challenge to the Ethanol Blending Programme.
- Barriers to Inter-state movement of ethanol: The central government amended the Industries Development and Regulations Act to ensure smooth implementation and transportation of Ethanol across the country. But only 14 states have implemented the amended provisions. As a result, states that produce ethanol more than the requirement for blending cannot transport the Ethanol to other states.
- Impact on India’s Food security: The diversion of food crops, such as rice for ethanol production, will hamper India’s food and nutritional security ambitions. For ex- In 2022, close to 1 million metric tonnes of rice fit for human consumption from FCI’s stocks was sold at subsidised prices to produce ethanol.
- Diversion of Agricultural Land: Excessive blending target can lead to the conversion of agricultural land used for growing food crops, to cultivating biofuel feedstocks like sugarcane, corn, or oilseeds.
- Impact on Water Availability: Incentives for higher ethanol blending might encourage increased sugarcane and rice cultivation, which are water-guzzling crops. According to TERI, 400 billion litres of water would be needed additionally, which can exacerbate concerns about agricultural sustainability.
- Impact on Soil Health: The practices of monocropping for biofuel feedstock crops (such as rice, sugarcane) can deplete the nutrients in the soil and make it infertile.
- Rise in import of maize: Government restricted the diversion of Sugarcane juice, syrup, and B-heavy molasses for ethanol production, over fears of falling sugar stocks. This reduction has increased the import of maize from $39 million in 2022-23 to $103 million in FY 2024. As per NITI Aayog’s estimates, ~ 4.8 million hectares will have to be added to maize cultivation area to meet the 20% target. This additional area is almost half of the current maize cultivation area in India.
- Increase in Import of Agricultural Crops: The use of crops like maize for ethanol blending increases the import bill and impacts related agricultural sectors such poultry sector and livestock feed.
What should be the Way Forward?
- Diversification to higher generation of biofuels: The government should diversify and move to 2G and 3G biofuels, that are more benign in terms of impact on food security as they are produced from agricultural waste and non-food biomass, such as rice straw and cotton stalks. This approach addresses concerns about food security and provides an additional source of income for farmers by monetizing their agricultural waste.
- Upgrading Logistics and Storage: The country’s logistics network needs significant investment to handle the increased demand for ethanol. This includes building more dedicated storage facilities and improving transport infrastructure to efficiently move ethanol from production sites to blending units.
- Vehicle Compatibility: Continued collaboration between the government, oil companies, and the automotive industry is crucial to ensure that vehicles are compatible with higher ethanol blends. Automakers need to accelerate the production of E20 compliant vehicles, while the government can offer incentives to encourage consumers to switch to these models.
- Increase in grain based distilleries: According to the roadmap for achieving ethanol blending targets, prepared by the NITI Aayog, India must invest to increase the capacity of Grain-based distilleries from 258 to 740 crore litres.
- Interest Subvention Programmes: Two interest subvention programmes should be provided for establishment of new distilleries and ramping up of ethanol generation capacity.
- Streamlining supply chain: The Oil Marketing Companies (OMCs) should sign more long-term contracts with distilleries. The inter-state movement of ethanol should be facilitated to streamline supply-chain.
- Promotion of maize cultivation in rotation with sugarcane: Maize is not water intensive. However, it degrades soil and cannot be the sole crop either. It should be cultivated in rotation with sugarcane to ensure that soil fertility is not degraded.
- Increase in fuel ethanol pricing: Increased price support for fuel ethanol can decrease its diversion towards liquor use.
Conclusion:
Ethanol blending programme is a strategic initiative that has the potential to reduce the petroleum imports, enhance energy security & promote cleaner combustion. However, there are certain supply-side & demand-side issues which must be addressed promptly by diversifying the feedstocks, enhancing the infrastructure, introducing technological upgrades to help India in successfully completing its sustainable energy transition.
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