CII webinar counters concerns about Indian govt’s push for 20% ethanol blending
‘If the market is positive and farmers are getting a benefit, then this should not be a concern’
Experts have been raising concerns regarding the Indian government’s push for blending 20% ethanol with petrol by 2025 aiming to reduce the country’s carbon footprint. Several government institutions and experts who came together at a CII (Confederation of Indian Industry) webinar on ‘Ethanol roadmap for 2025’ countered these concerns.
The Government of India and the Oil Making Companies have been strongly promoting blending 10% ethanol with petrol aiming to reduce the carbon footprint and conserve foreign exchange by reducing import of crude oil. Government’s plans are to gradually increase the blending percentage to 20% by the year 2025 for which the ethanol requirement is expected to be around 900 crore litres.
Last year in June, on Environment Day, PM Narendra Modi released a report that laid out an annual plan for the gradual rollout of E20 ethanol in the country, Also, according to the report, 20% ethanol blending by 2025 will save INR30,000 crore of foreign exchange per year, provide energy security, lower carbon emissions, better air quality, use up damaged food grains, increase farmer incomes, generate employment, and bring in greater investment opportunities.
However, some experts are saying that a 20% blending target that focuses on feedstock as the source, could be harmful and lead to changes in land use patterns and demand for more water.
At the CII conference, which was supported by GPS Renewables, Sangeet Singla, Chief Director (Sugar), Department of Food and Public Distribution (DFPD), said that if the market stays positive and farmers can accrue benefits, it shouldn’t be a problem.
In a way, the whole development of ethanol is a win-win situation, and in this whole scenario, the government of India is keeping the farmers at the centre stage
“Many people are raising the question that diverting grains to ethanol may lead to food shortage. If we look at the data, our country produces about 122 million tons of rice every year and we have sufficient stocks. This year our exports are going higher because of the international scenario, and we are getting better prices. If the market is positive and farmers are getting a benefit, then this should not be a concern,” he says.
Ramya Natarajan, a research scientist at the Center for Study of Science, Technology and Policy (CSTEP), a Bengaluru-based think tank, told Mongabay-India that a 20% blending target will mean increased sugarcane cultivation, leading to use of more arable land and groundwater, affecting food security.
“Further, existing vehicles are compatible with 5-10% ethanol-blended petrol, so an increase in blending beyond that would mean replacing the existing stock or investing in retrofitting and calibrations,” she said.
Using rice or damaged food grain for ethanol will not result in any food security issues in our country as of now
However, Singla says that the plan is to use rice from the Food Corporation of India (FCI) for the balance, which he adds can benefit farmers.
“For ethanol, we are using damaged food grain and broken rice, and only for the balance portion we are using FCI rice. We are supplementing damaged food stock with FCI stock. This is again a stimulus for farmers because if we are able to utilise the rice available with FCI judiciously, this will encourage more procurement in the market and we can ensure better prices for farmers,” he says.
“In a way, the whole development of ethanol is a win-win situation, and in this whole scenario, the government of India is keeping the farmers at the centre stage. Using rice or damaged food grain for ethanol will not result in any food security issues in our country as of now,” he adds.
Will ethanol demand be driven by vehicle profile on road?
Another concern cited is that ethanol sale is influenced by petrol sales, vehicle profile and the blending mandate in the country. This means ethanol demand is likely to be driven by the vehicle profile on road.
Anurag Saraogi, CGM, BPCL – Biofuels, refutes this.
A little bit of disruption is expected from Electric Vehicles but that would largely be offset by the introduction of flex fuel vehicles which can take anything above 20% to the currently talked about 85% of ethanol in the vehicle
“A little bit of disruption is expected from Electric Vehicles but that would largely be offset by the introduction of flex fuel vehicles which can take anything above 20% to the currently talked about 85% of ethanol in the vehicle,” he said.
“Indian ethanol mandate is currently at 20%. But there is a big opportunity to go beyond that. For example, in Brazil, the average share of ethanol, because of the flex fuel vehicles, is anything between 46 to 49% of the fuel sales component to petrol driven vehicles. Which means that there is a big opportunity for India to go from 20% to as high as 46% if all the factors are favourable,” he added.
Can India Touch the 20% Goal?
Meanwhile, is India even ready to produce the amount of ethanol to reach the 20% goal?
According to Ethanol for India, OMCs have invited Expression of Interest (EOI) to procure 457 crore litres of ethanol from various feed stocks sourced from sugarcane and grains, maize, and damaged food grains against which OMCs have received offers for 330 crore litres only in 2021.
A study by ICRA claims that to achieve the 20% blending target, India needs to triple its ethanol production. As per NITI Aayog, to meet the 20% objective, India’s ethanol production must increase to 10.2 billion litres, with 5.5 billion litres of 1G ethanol produced from sugarcane and 4.7 billion litres produced from grains. India’s current ethanol production capacity stands at 3 billion litres.
Lack of financial stability to invest in biofuel plants and uncertainty over the price of bioethanol in the future are some of the key challenges in meeting the ethanol blending target.
There is little doubt about the government’s seriousness regarding this looking at the amount of money being spent on the effort. Manju Bolakani, Chief General Manager, SBI, revealed that the SBI has sanctioned almost INR2500 crores worth of projects to finance about 25 units.
It’s a good step that DFPD has been monitoring capacity creation through their portal to ensure that non-serious players are filtered out
“I am sure the figures reported by other banks would also be equally good. It’s a good step that DFPD has been monitoring capacity creation through their portal to ensure that non-serious players are filtered out,” she said.
To bypass regulatory hurdles, the DFPD has announced the National Single Window Portal system, where all the existing distillers and new ones must register on, which will provide information about all required approvals.
Aligning with the 20% Goal
Other institutions too announced their support for the government’s initiatives. PK Banerjee, Executive Director, SIAM (Society of Indian Automobile Manufacturers) assured that SIAM is aligned with the government’s 20% ethanol blending plan.
“If you take the annual numbers, around 2.5 crore vehicles are produced every year on an average. Out of this 80% are two wheelers, 15%-17% are four wheelers and 3-4% are three wheelers. With this backdrop, we can say that, annually about 70% gasoline is used by two wheelers and 30% gasoline is being used by 4 wheelers.
With the growing number of vehicles added every year, we are very clear that higher blends of ethanol usage roadmap is very critical not just from energy security point of view but also for greenhouse gas mitigation, reduction of local pollution, improvement of farmer incomes
“With the growing number of vehicles added every year, we are very clear that higher blends of ethanol usage roadmap is very critical not just from energy security point of view but also for greenhouse gas mitigation, reduction of local pollution, improvement of farmer incomes and as well as the whole Atmanirbhar Bharat mission,” he said.
Needless to say, the involved organisations are upbeat about ethanol production and are glad that OMCs are finally catching up.
Sridhar Goud, Executive Director, Supplies Operations and Distribution, HPCL, said, “This is the first time that OMCs have touched 10% ethanol blending in a month. Earlier, when this program was started, there were very few players who were offering ethanol. Mainly from the states of UP, Maharashtra and some portions of Karnataka too. The competition used to be in such a way that suppliers used to offer discounts on the transportation.
“At some point of time, the suppliers would quote the transportation rate in negative also. There have been many government initiatives that have been rolled out and this has really helped in improving the ethanol blending percentage.”
The ethanol blending push has resulted in sugar companies gaining traction lately. For instance, Dalmia Bharat Sugar and Industries Ltd, one of India’s youngest major sugar companies, has been expanding into the non-sugar spaces.