Ethanol Push Turns India into a Net Corn Importer, Reshaping Global Market
- September 5, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Ethanol Push Turns India into a Net Corn Importer, Reshaping Global Market
Sub: Eco
Sec: Unemployment
- India Becomes a Net Corn Importer:
- India, traditionally an exporter of corn, has now turned into a net importer for the first time in decades due to a shift in ethanol production policies.
- Ethanol distilleries have begun using domestic corn, previously absorbed by the poultry and starch industries.
- Shift in Ethanol Production Policy:
- In January 2024, India increased the procurement price of ethanol made from corn to encourage a move away from sugarcane-based ethanol for blending in gasoline.
- This policy aims to reduce carbon emissions and ensure an ample supply of sugar in the domestic market.
- Impact on Corn Imports and Global Prices:
- India is set to import a record 1 million tons of corn in 2024, primarily from Myanmar and Ukraine.
- The surge in Indian demand is expected to support global corn prices, currently near four-year lows.
- India’s corn exports are expected to drop to 450,000 tons, down from 2-4 million metric tons in previous years.
- Pressure on Domestic Poultry Producers:
- Rising domestic corn prices, far above global benchmarks, have increased feed costs for India’s poultry industry, leading producers to call for the removal of duties on imports and a lifting of the ban on genetically modified (GM) corn.
- Corn imports currently attract a 50% duty, although India allowed 500,000 tons to be imported at a concessional duty of 15%.
- Increase in Domestic Corn Demand:
- Ethanol distilleries now need 6-7 million tons of corn annually, which can only be met through imports.
- The government aims to increase the ethanol blend in gasoline to 20% by 2025-26, up from 13% currently.
- This will require more than 10 billion litres of ethanol, double the amount produced in 2023.
- Challenges for Poultry Farmers:
- Rising corn prices have pushed poultry growers into losses, as feed costs account for 75% of production expenses.
- Farmers report production costs exceeding selling prices, leading to unsustainable losses for the poultry industry.
- To mitigate costs, some farmers are substituting corn with rice and wheat stalk waste in feed.
- Corn Planting and Price Trends:
- Higher domestic corn prices have encouraged farmers to expand the area under corn cultivation by 7%.
- However, smaller poultry farmers are struggling to adjust, with some reducing production due to high feed costs.
- Global Supply Chain Effects:
- Booming Indian demand has raised corn prices in Myanmar to $270 per metric ton (FOB) from $220, incentivizing farmers to plant more corn.
- Imports from Myanmar are duty-free due to its status as a least developed country, while starch makers are importing duty-free corn from Ukraine under India’s Advance License Scheme.
- Surge in Corn Imports and Decline in Exports:
- In the first half of 2024, India’s corn imports surged to 531,703 tons, a significant jump from just 4,981 tons a year earlier.
- Meanwhile, corn exports plummeted by 87%, from 1.8 million tons to 241,889 tons, reflecting the impact of increased domestic demand for ethanol production.
Ethanol Blending Program (EBP)
The Ethanol Blending Program (EBP) is an initiative by the Government of India aimed at promoting the use of ethanol as a renewable, environment-friendly fuel blended with petrol. This initiative has multiple benefits, including reducing the dependency on imported fuels, conserving foreign exchange, and supporting domestic industries, particularly the sugar industry.
National Policy on Biofuels (2018)
India’s National Policy on Biofuels (2018) aims to promote the production and use of biofuels in the country to reduce dependence on fossil fuels, promote renewable energy, and address environmental concerns like greenhouse gas emissions. The policy also emphasizes the development of indigenous biofuel production capacity, particularly from domestic feedstock.
Key Features of India’s Biofuel Policy (2018):
Types of Biofuels:
- Basic Biofuels: Ethanol, biodiesel.
- Advanced Biofuels: 2G (Second Generation) biofuels, including ethanol from agricultural residues, and 3G (Third Generation) biofuels like algal biofuels.
- New Feedstocks: The policy allows for the production of biofuels from various feedstocks, including surplus food grains, sugarcane juice, and damaged food grains.
Categorization of Biofuels:
- 1st Generation (1G) Biofuels: These are made from edible feedstocks like sugarcane and corn. Ethanol and biodiesel are examples of 1G biofuels.
- 2nd Generation (2G) Biofuels: These are made from non-edible feedstocks such as agricultural residues, municipal solid waste, and lignocellulosic materials.
- 3rd Generation (3G) Biofuels: Derived from algae, they are highly efficient and less resource-intensive.
- Advanced Biofuels: Includes biofuels like ethanol produced from forest and agricultural residues, waste, and other non-food feedstock.
Blending Targets:
- Ethanol Blending in Petrol: The policy targets 20% ethanol blending (E20) by 2025-26. The government encourages the production of ethanol from various sources, including damaged grains and molasses.
- Biodiesel Blending in Diesel: The target is 5% blending of biodiesel with diesel by 2030.
Raw Materials for Biofuel Production:
- Ethanol: Can be produced from sugarcane juice, sugar, molasses, damaged food grains, surplus food grains, etc.
- Biodiesel: Can be produced from non-edible oilseeds, used cooking oil, animal fats, and other waste oils.
- 2G Ethanol: Will be produced from agricultural residues, biomass, and lignocellulosic feedstocks like rice husk, wheat straw, and bagasse.