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Ethanol Growth Story

Posted On: 04 NOV 2021 12:37 AM

  1. India’s Energy Demand
  • India is the world’s third largest energy consuming nation.
  • A significant part of India’s energy requirement is met through imported oil.
  • India’s share in global energy consumption is set to double by 2050.
  • A rising energy demand and high reliance on import poses significant energy security challenges.
  • It also leads to massive foreign currency outflow.
  • Further, excessive use of fossil fuels leads to higher carbon emissions and associated health concerns.

 

  1. Ethanol: APotential Solution

 

  • Domestically produced ethanol is a potentialopportunity to reduce reliance on oil imports byblending it with conventional fossil fuels forconsumption.
  • India started blending ethanol in petrol on a pilot basis in 2001.
  • No significant progress was made under the ethanol programme and the production of ethanol remained stagnated until recently when transformative reforms were carried out.
  • The results are set to help not only the economy but transform farmers’ income and recharge the rural economy.

 

  1. Ethanol Blended Petrol (EBP) Programme

 

  • EBP was launched in January 2003.
  • In 2006, the Ministry of Petroleum and Natural Gas directed the Public Sector Oil Marketing Companies (OMCs) to sell 5% EBP in 20 states and 4 UTs.
  • The programme was implemented only in limited states and UTs till 2019 excluding north-eastern states and the entire state of J&K and Ladakh.

 

  1. Challenges faced by the EBP Programme
  • Non-inclusion of conversion of grain to Ethanol, restricting grain-based distilleries to participate in EBP
  • High taxation of ethanol, rate of 18%applicable
  • Procurement challenges due toinfrastructure and multiple tenders in agiven supply year
  • Dissatisfactory ‘take home’ price andirregular pricing for ethanol suppliers
  • Limited availability of feedstock(raw material)
  • Constraints on the part of stategovernment

 

5. Ethanol Blended Petrol (EBP) Programme – Timeline

 

  • December 2014 -Re-introduced administered price mechanism for ethanol to be procured under the EBP Programme; opened alternative route for ethanol production, directed Oil PSEs to set up bio-refineries
  • 2014-15 –Steps taken towards simplifying the tendering processes
  • May 2016–Industries (Development and Regulation) or IDR Actamended on 14th May 2016 to clarify on the roles of Central and State Government for continuous supply of ethanol to be blended with petrol
  • June 2018 - Notified forward-looking and updated National Policy on Biofuels, 2018 involving all stakeholders
  • July 2018 -Interest Subvention Scheme to improve andincrease ethanol production capacity in the Country.GST on Ethanol lowered from18% to 5%
  • 2018-19 -Allowed conversion of B heavy molasses, sugarcane juice and damaged food grains to ethanol.
  • April 2019 -Extended EBP Programme to the whole of India except the Island UTs of Andaman Nicobar and Lakshadweep
  • September 2019 - New sources, sugar and sugar syrup, introduced for ethanol production at fixed remunerative price
  • October 2019 - Published “Ethanol Procurement Policy on a long-term basis under EBP Programme”
  • August 2020-One time registration of ethanol suppliers for long term, including giving them visibility of ethanol demand for 5 years.
  • September 2020 - OMCs started to provide Off-take guarantee letter and consent to sign tripartite agreement with ethanol suppliers and bankers to support the ethanol capacity expansion projects.
  • October 2020 - Further ease of tender conditions by OMCs like one time document submission, quarterly bank guarantees, multiple transportation rate slabs and transportation rates being linked to Retail Selling Price (RSP) of diesel, reduction in security deposit and applicable penalty on non-supplied quantity etc.

Approval of National Biofuel Coordination Committee (NBCC) to utilise surplus stock of rice lying with Food Corporation of India (FCI) to be released to the distillers for ethanol production.

  • November 2020 - Approval of NBCC to utilise maize for ethanol production. Interest subvention scheme for augmentation of ethanol production capacity extended to grain based distilleries.
  • December 2020 - OMCs have increased their ethanol storage capacity from 5.39 Crorelitres in November 2017 to 16.9 Crorelitres till December 2020, thereby providing ethanol storage cover of over 20 days at their depots.

 

6. Effects of Landmark Reforms

 

  • Ethanol supplies and blending percentage have increased more than five times in last six years
  • Remunerative prices of ethanol to suppliers have more than doubled in last six years-a major boost to farmers’ income
  • Ethanol distillation capacities almost doubled and number of distilleries increased by 40% in five years.
  • Ethanol Storage capacity has increased three times from 2017 to 2020
  • The decision to allow diversion of B heavy molasses, sugarcane juice / sugar / sugar syrup for ethanol production in 2018-19 enabled reliable supply of feedstock and the price stability of sugar
  • Under EBP, OMCs have paid sugar mills nearlyRs. 42,000 crore for ethanol supplies in the last sevenyears, which has helped mills to clear farmers’dues. Additionally, decision is taken to buydamaged and surplus food grains for ethanolproduction, ensuring price value for surplus grainstock as well as accommodating the fresh seasoncrop to meet EBP target.
  • The cumulative foreign exchange impact dueto EBP Programme is estimated overRs. 26,509crore during the period ESY 2014 to 2021 (up toJuly 2021).
  • One crorelitre of ethanol blended petrol can savearound 20,000 tons of carbon dioxide emission. Greenhouse gas emissions due to theEBP Programme were lowered by 192 lakh tons from 2014to 2021 (up to July 2021).
  • The IDR Act implementation enabled StateGovernments to avoid complicated documentationprocedures and conduct pro-business activities likee-approvals, online permits, electronic locking,GPS tracing of vehicles carrying ethanol etc.

 

7. The Future Landscape of Opportunities

 

  • Ethanol Industry is expected to grow by 500%
  • Ethanol distillation capacity to grow by more than three times to 1500 crorelitre annually
  • Launch of new vehicles compatible to run on E20fuel from 2023 and flex fuel vehicles from 2024
  • Will attract new investment and create employment opportunities

 

Source: PIB e-Booklet on Ethanol Growth Story

 

AG/PPD/RK

 

 

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