Govt’s ethanol blending programme faces supply and pricing problem

Source: The post is based on an article “Govt’s ethanol blending programme faces supply and pricing problem” published in Business Standard on 14^th October 2022.

Syllabus: GS 3 – Environment

Relevance: concerns associated with the ethanol blending processes

News: India has achieved ethanol blending of over 10 per cent till September 2022 and it has set a target to achieve 20 per cent ethanol blending by 2025.

There are two sources required for ethanol blending. They are – a) sugarcane-based and b) grain-based.

The present condition shows that the second source needs to be focused by the government.

What is the present situation of ethanol blending process?

In order to achieve the target of 20 per cent ethanol blending by 2025, India requires a production capacity of around 14.5 billion liters.

Around 3.33 billion liters of ethanol have been supplied in the current ethanol supply year (December 2021-November 2022).

Out of these, the sugar industry has contributed 2.87 billion liters (almost 86 per cent) and the rest has been contributed by grain-based distilleries.

Therefore, there is a need to increase ethanol production from grain to meet targets.

What are the challenges being faced by the grain-based ethanol production?

Sourcing rice husk to run their boilers has been a challenge because of the rising demands is putting pressure on rice husk prices. The price of rice husk has increased from around Rs 3.5 to almost Rs 10.5 a kg.

It is also expected that prices will further go up with the increased competition in the market because grain-based mills do not have any dedicated areas to source husk like sugarcanes.

Further, the price of broken rice has also shot up over the past year from Rs 15,000 to almost Rs 22,000 per tonne. Even the ban on the export of broken rice has not been very effective in controlling the price.

The price of maize has also jumped from Rs 15,000 to around Rs 22,000 a tonne. Broken rice and maize are the important components for ethanol production.

Moreover, an average grain-based distillery does not have option to get fix prices of raw material as the sugarcane industry has.

Further, there are moral issues also involved in diverting too much rice and maize for ethanol production as affordable food remains an issue in India.

What are the problems faced by the production of ethanol form biomass?

Ethanol produced from biomass is called 2G ethanol. It is called 2G ethanol because ethanol is produced from second-generation sources such as paddy stubble.

The government announced to set up 12 integrated 2G ethanol plants in 2018. However, even after four years only one plant has been constructed.

The high cost of the technology and convincing farmers are major challenges faced by State-owned oil marketing companies (OMCs) that wish to produce 2G ethanol.

An investment of Rs 1,969.5 crore had been set aside for OMCs by the government under Pradhan Mantri JI-VAN (Jaiv Indhan-Vatavaran Anukool Fasal Awashesh Nivaran Yojana). Even this scheme is being re-evaluated.

Moreover, PM Modi has launched the first 2G ethanol plant built by Indian Oil Corporation (IOC) at an estimated cost of Rs 900 crore in Haryana’s Panipat. The cost of setting up plant has risen due to the high cost of the technology.  Further, the absence of suitable supply chains for bio-ethanol will increase challenges for its transportation to the plant.

There also challenges for storing the raw biomass at 2G ethanol plants without degradation.

Therefore, there is a need that government should come up with proper solutions as ethanol production is important to reduce import bills from oils.