The Centre has decided to advance the deadline for achieving the 20 per cent target for ethanol blending with fuel by two years to 2023, helping the nation save more forex on the oil import front, push for a greener future and also help cut sugar industry cut its huge inventory.

In a gazette notification issued on Wednesday, the Ministry of Petroleum and Natural Gas directed oil marketing companies to sell ‘Ethanol Blended Petrol” with percentage of ethanol up to 20 per cent, with effect from April 1, 2023. Earlier, it had advanced the deadline from 2030 to 2025.

The latest directive comes within days of the government expanding the scope of the Sugarcane Control Order (SCO), 1966, to treat standalone ethanol making plants as part of the sugar industry. With this, ethanol production will no longer be an ancillary activity of sugar production and dedicated ethanol distilleries making ethanol from sugarcane directly can come up. Besides, they would be able to supply not just ethanol for blending, but also other alcohol products from chemical industrial applications as well as liquor manufacture. Ethanol plants, however, would be bound to pay fair and remunerative prices for the sugarcane they procure from farmers.

The decision is significant because Uttar Pradesh, the largest sugarcane growing State, recently approved 54 new ethanol plants. In addition, plants that produce ethanol from damaged foodgrains received the nod from the Yogi Adityanath government a few days ago.

Ethanol requirement

According to experts, India would need 850 crore litres of ethanol and around 1,000 crore capacity to reach 20 per cent blending levels. Currently, India’s ethanol production capacity is around 425 crore litres, but only 325 crore litres is available for fuel blending, as a certain quantity is used for making rectified spirt (used in chemical industries) as well as extra neutral alcohol, for making liquor as well as sanitisers. With 325 crore litres, oil marketing companies (OMCs) have achieved 8.5 per cent blending this year, up from less than two per cent in 2017. In the next ethanol year (which runs from November to October), the government is aiming to achieve a blending target of 10 per cent.

Ethanol is currently blended in refineries as well as pump outlets but the OMCs could soon shift it to the refineries.

“Post the new ethanol blending programme announced in 2018, India’s ethanol production capacity has picked up significant pace. However, doubling procurement in one single year would be a difficult task and we believe achieving the 20 per cent target in 2023 would be distant from reality,” said Praful Vithalani, proprietor of Jagjivan Keshavji Co.

But experts say that the 20 per cent target is achievable with more sugarcane getting diverted. Currently, the sugar industry is carrying over 10 million tonnes of stocks from the last season and for the current season to September too, a similar amount is expected to be carried over. The Centre has encouraged the diversion by raising the price of ethanol extracted from sugarcane juice to Rs 62.65 a litre.

According to the Indian Sugar Mills Association, the Centre is looking to increase the number of E-20 vehicles that will have 20 per cent ethanol blended in petrol. The Centre might come up with some norms on E20 vehicles from 2023.

There is no issue with Indian vehicles being able to use fuel blended with 20 per cent ethanol. The Society of Indian Automobile Manufacturers has already committed to the government that its members will release new vehicles with E20 material compatible from 2023.

“However, with this directive, the government has made its intentions very clear and this will obviously add further fuel to the already hot ethanol story, Industry players will commit more capital and ultimately players will benefit from high ethanol profitability,” he said.

Vithalani, however, pointed out some risk factors. In case of a drought in any year, he said, the government may be compelled to give priority to sugar production first. This could impact standalone ethanol plants. Similarly, it has made it mandatory for OMCs to procure ethanol at higher prices, but this could be unviable in the long run, he said. Since sugar is a politically sensitive commodity, it may get priority over ethanol, particularly in election years, Vithalani said.

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