Ethanol Blending Program in India

Ethanol Blending Program in India

Updated on 6 September, 2019

Daily Updates

The article analyses the ‘Ethanol Blending Programme’ in detail, on account of Government’s decision to raise the price of ethanol to be procured by public sector OMCs and allowing conversion of old sugar into ethanol. Rationale

  • Higher price is to encourage sugar mills to divert from sugar production.
  • It will help in further increasing the ethanol blend levels from the current 6% average levels across the country.
  • Increased ethanol blending in petrol is expected to replace 2 million tonnes of oil annually, helping to save $1 billion in import bill.
  • Ethanol, an anhydrous ethyl alcohol having chemical formula of C2H5OH, can be produced from sugarcane, maize, wheat, etc which are having high starch content.
  • In India, ethanol is mainly produced from sugarcane molasses by fermentation process. Ethanol can be mixed with gasoline to form different blends.
  • As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions and thereby reducing the occurrence of environmental pollution.
  • Cane-based ethanol can be produced three different ways; directly from cane juice, from B-grade and C-grade molasses.
  • Since ethanol is produced from plants that harness the power of the sun, ethanol is also considered as a renewable fuel.
‘Ethanol Blending Programme’ (EBP)
  • Ethanol Blended Petrol (EBP) programme was launched in 2003. The programme sought to promote the use of alternative and environmentally friendly fuels and to reduce import dependency for energy requirements.
  • In September 2006, the Ministry of Petroleum & Natural Gas (MoP&NG) in its notification, directed the Oil Marketing Companies (OMCs) to sell 5% Ethanol Blended Petrol with respect to the commercial viability of ethanol as per BIS specifications.
  • With effect from April 2019, this programme has been extended to the whole of India except Andaman Nicobar and Lakshadweep islands.
  • The National Policy on Biofuels 2009 had a target to achieve 20% blending of biofuel by 2017.
  • However, due to certain technical, market and regulatory hurdles, India was able to achieve only 5% ethanol blending by September 2016.
  • To tackle the problem, Government announced the National Policy on Biofuels in 2018.
National Policy on Biofuels 2018:
  • The policy categorises biofuels into:
    1. First Generation (1G): Basic Biofuels - biofuels produced from conventional, well established processes. 1G biofuels are produced from - sugars, grains, or seeds, a specific (often edible) portion of the above-ground biomass and starch laden crops like sugarcane, sugar beet, corn etc.
    2. Second Generation (2G): Bioethanol and Biodiesel and Advanced biofuels - generally made from lignocellulosic biomass including non-edible whole plant biomass like grasses or trees and non-edible residues of food crops like corn stalks or rice husks.
    3. Third Generation (3G): Bio-CNG - Algae is the most promising feedstock to produce this type of biofuel.
  • The biofuels are also categorised into the 4th generation which includes photobiological solar fuels and electrofuels but not included in the NPB, 2018.
  • Scope of raw material for ethanol production has been expanded by using Sugarcane Juice, Sugar Beet, Sweet Sorghum, Corn, Cassava, wheat, broken rice, Rotten Potatoes, non-edible oilseeds, Used Cooking Oil, short gestation crops.l etc.
  • The Policy also indicate a viability gap funding scheme for 2G ethanol Bio refineries in addition to additional tax incentives and higher purchase prices compared to 1G biofuels.
Measures Taken - Procurement/Production of ethanol
  • The OMCs are to procure ethanol from domestic sources. Government has notified administered price of ethanol since 2014.
  • Government has also allowed the production of ethanol from damaged food grains. OMCs are offering differential pricing to incentivize this route.
  • Government has reduced the GST rate on ethanol meant for EBP Programme from 18% to 5%.
  • Government has been regularly interacting with the State Governments and other stakeholders to resolve the bottlenecks in smooth implementation of EBP Programme.
  • Department of Food & Public Distribution has introduced a Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity.
  • Government has allowed mills to produce ethanol directly from sugarcane juice and from ‘B’ heavy molasses.
  • Recently the Cabinet Committee on Economic Affairs has approved sugar and sugar syrup in the production of ethanol by fermenting them along with the mother molasses.
  • Mills get higher rates for manufacturing ethanol from the ‘B’ heavy and sugarcane juice routes.
  • Increasing the production of biofuels can strain India’s water resources and affect food availability.
  • Other biofuels, such as jatropha, have often proven to be commercially unviable.
  • India lags top producers, US and Brazil, by a huge margin and remains inefficient in terms of water usage.
  • Ethanol produced from sugar and sugar syrup may cost Rs 59.48/litre rate. Whereas the current rate of sugar is 32 Rs/Kg. Thus it can adversely affect the sugar market.
Expected Benefits:
  • Reduce Import Dependency
  • Cleaner Environment
  • Health benefits
  • Municipal Solid Waste Management
  • Infrastructural Investment in Rural Areas
  • Employment Generation
  • Additional Income to Farmers
  • As the country is producing too much sugar and importing a huge amount of oil, the EBP would be seen beneficial both for mills and for the country’s BoP.
  • 10% blending of ethanol requires 330 crore liters of extra ethanol, which would now be produced through the ‘B’-heavy molasses as well as sugarcane juice.

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