On the ethanol blending programme

Sub: Schemes

Sec: Env

Progress Towards Ethanol Blending Targets:

India aims to blend 20% ethanol with petrol by 2025-26 and is progressing well toward this goal.
Current blending rates have increased to 13% to 15% from about 8% in 2021.
Ethanol production capacity has risen significantly, with total capacity reaching 1,380 crore litres by December 2023.

Food vs. Fuel Debate:

Concerns about food security persist due to increased maize imports and its use in ethanol production, which is partially replacing sugarcane-based ethanol.
Industry leaders argue that India has ample grain and sugar surpluses, and food security is not at risk.
The government is encouraged to shift focus to second-generation (2G) and third-generation (3G) ethanol to mitigate food security issues.

Ethanol Production Capacity and Investment:

To meet the 20% blending target, India needs to produce about 1,000 crore litres of ethanol.
The sugar industry has invested approximately ₹40,000 crore in expanding production capacity, adding 92 crore litres in just two years.
The roadmap for achieving ethanol blending targets, prepared by the Niti Aayog, had laid down that the capacity of sugarcane-based distilleries would need to increase from 426 crore litres in 2021 to 760 crore litres in 2026, while grain-based distilleries’ capacity should increase from 258 to 740 crore litres.

Government Measures and Industry Needs:

Two interest subvention programs have supported the expansion of ethanol production capacity.
The industry advocates for extending these programs and securing long-term contracts with Oil Marketing Companies (OMCs) to ensure supply stability.

Impact of Ethanol Production on Sugar and Maize:

Sugarcane:
- Sugarcane gives rise to three main related products — sugarcane juice and syrup, B-heavy molasses and C-heavy molasses, in the order of decreasing sugar content.
- The first two would typically go to making sugar while the third will be used for ethanol production.
- In a bid to up fuel ethanol production, the government had started permitting the diversion of the first two away from sugar production to fuel ethanol.
- Ethanol pricing depends on the sugar content of the input.
- In 2022-23, 63% of fuel ethanol came from B-heavy molasses and 33% from molasses.
- In December, 2023, the government restricted the diversion of the first two over fears of falling sugar stocks.
- Sugarcane production requires substantial water, which may affect other crops.
Maize:
- India ranks as a major maize producer globally, but domestic consumption consistently outpaces production.
- A rapid diversion to ethanol will drive up prices and negatively impact its major uses — the poultry sector by 47%, followed by livestock feed (13%) and starch (14%).
- At 3 to 4 tonnes per hectare, India’s maize yield is much lower than other countries.
- While maize production has jumped in the last few years, ministry of commerce data shows that in 2023-24, Indian maize (corn) imports were $39 million.

Ethanol’s Role in Fuel Efficiency:

Ethanol helps reduce greenhouse gas emissions and could save $4 billion in foreign exchange annually.
Existing vehicles may experience reduced fuel efficiency with higher ethanol content, requiring adjustments for E20 compliance.
Maruti Suzuki and other manufacturers are preparing for the E20 deadline, with many vehicles already compatible.

Regional Perspectives on Ethanol Policy:

Uttar Pradesh: Major contributor to ethanol blending, with a significant portion of ethanol coming from sugarcane. The state is fully aligned with the central government’s ethanol goals.
Tamil Nadu: Fuel ethanol production faces challenges due to water requirements and political sensitivity regarding rice allocation. The state relies heavily on liquor revenue, affecting ethanol adoption.
Maharashtra: Focuses on producing Extra Neutral Alcohol (ENA) for various uses, with ethanol blending being less profitable unless supported by steady contracts.

Source: TH