Ethanol blending falls to 11.72% in August amid feedstock shortage

The percentage of ethanol blended with petrol by oil marketing companies (OMCs) fell to 11.72 per cent in August this year from 11.77 per cent in July, due to unavailability of feedstock such as rice.

The Ministry of Petroleum and Natural Gas (MoPNG) attributed the decline in blending to the discontinuation of rice supply by Food Corporation of India (FCI) since July 2023.

The lack of FCI rice supply led to a spike in prices of feedstock, namely domestic food grains (DFG) and maize, in the market, and a fall in the supply of grain-based ethanol by 2.5-3 crore litre per week, as grain-based distilleries halted operations for more than a month, the ministry added.

The distilleries also asked for higher prices to compensate for the high prices of DFG and maize.

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Feedstock switchover

The OMCs increased the ex-mill price of ethanol from DFG and maize in two tranches during August. The DFG-based ethanol price has been increased by 15.2 per cent, from Rs 55.4 per litre to Rs 64 per litre. Prices of maize-based ethanol were raised by 17.2 per cent, from Rs 56.35 a litre to Rs 66.07. OMCs have also allowed the switching of feedstock from FCI rice to DFG and maize.

For the ethanol supply year (ESY) 2022-23 (December 1 to October 31), the OMCs floated a tender for 599.7 crore litres of ethanol, against which letters of intent (LoIs) for 564.45 crore litres were issued.

OMCs received 413.47 crore litres of ethanol, as of August 2023, and achieved a cumulative blending of 11.72 per cent for ESY 2022-23.

In FY23 (April-August), OMCs have procured 19.25 crore litres of biodiesel for the biodiesel blending programme.

Ethanol projects

The supply of surplus rice stock by FCI from the central pool for conversion into ethanol was started in FY21. In ESY 2020-21, around 49,000 tonnes of rice was lifted, generating a revenue of Rs 98 crore.

Similarly, around 10.68 lakh tonnes of rice was lifted from FCI’s central pool for producing ethanol in ESY 2021-22 (revenue of Rs 2,136 crore). In ESY 2022-23 (till July 10), around 13.05 lakh tonnes of rice was lifted (revenue of Rs 2,610 crore).

In March 2019, the government notified the Pradhan Mantri JI-VAN (Jaiv Indhan — Vatavaran Anukool Fasal Awashesh Nivaran) Yojana to provide financial support for setting up second-generation (2G) ethanol projects using lignocellulosic biomass and other renewable feedstock. The financial outlay for the scheme is Rs 1,969.50 crore for the period FY19-24, with Rs 880 crore worth of projects approved so far.

Lack of feedstock

When asked about the lack of feedstock, Food Secretary Sanjeev Chopra said “We have a target of 15 per cent blending for 2023-24 season (November-October). We are discussing with agriculture and petroleum ministries. There are various feedback for ethanol production. Yes, we had issued 13-14 lakh tonnes of FCI rice this year which will not be available to the distilleries next season.”

Besides, the OMCs will shortly declare the ethanol purchase price for different feedstock and the Ministry hopes that the new prices to be declared (for ethanol from grain) will incentivise the sugar mills to divert part of their stock. There will be main focus on ethanol from maize, as distilleries were earlier not using as the feedstock earlier. In the last two months, there has been substantial quantity produced from maize, he added.

The yield of maize can be raised from 3 tonnes per hectare to 5 tonnes per hectare in next two years, which will increase the availability of the feedstock for ethanol, Chopra said.

Maize production has potential to go up by 100 lakh tonnes from current 360 lakh tonnes, he added.

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