Blend more

| Updated on April 08, 2021

The Centre must look to reduce its dependence on the sugarcane sector for ethanol blending scheme   -  Bloomberg

As ethanol blending ratio hits 7%, the Centre must cut the programme’s high cane reliance

After faltering for many years, India’s ethanol blended petrol programme (EBP), designed to reduce the country’s fossil fuel dependence and trim its large crude oil import bill, appears to be taking baby steps. In the first four months of the current supply year (December 2020 to November 2021), about 80 crore litres of ethanol have made it to the fuel pumps, translating to a blending ratio of 7 per cent. Should supplies continue at this pace, the country could get to a blending ratio of 8.5 per cent for the full year. This would be an achievement in itself, given that it was less than 2 per cent in 2017 and has never exceeded 5 per cent blending thus far. The achievement of this year’s targets would lend some credibility to the Centre’s decision to bring forward the targets, set in the National Biofuels Policy, for 10 per cent ethanol blending by 2022 and 20 per cent by 2025. But, then, after showing promise, India’s EBP programme has often come a cropper.

Both the sugar industry and oil marketing companies (OMCs) have taken an opportunistic approach to the EBP that has proved to be its undoing. Sugar millers, after making strident demands for higher blending to get rid of excess cane, have displayed a marked reluctance to stick to fixed annual supplies. In deficit years, they prefer to divert more cane to sugar and alcohol to industrial or potable uses in the hunt for better margins. OMCs, on their part, have failed to lift their contracted quantities of ethanol when imported crude oil has turned cheaper. The Centre, playing referee, has sought to establish some ground rules in the last three years — setting annual supply obligations for sugar millers, fixing selling prices for ethanol produced through different routes, and requiring OMCs to pay these prices with reasonable transportation costs. This has seen ethanol supplies rise from 38 crore litres in 2013-14 to a targeted 262 crore litres in 2020-21, with the sugar industry owning capacities for 300-350 crore litres. But given that a 20 per cent blending ratio will require roughly 1,000 crore litres of ethanol, there’s still a long way to go, both in terms of distillery capacity and storage and blending infrastructure to be set up by the OMCs.

Even as it leans on both sugar mills and OMCs to fulfil their contractual obligations, the Centre must look at ways to reduce the programme’s dependence on the sugarcane route. India’s expanding sugarcane acreage is a big contributor to its acute water stress and poor crop diversification. Detailed studies have already established that alternative feedstock, such as agricultural waste and recycled cooking oil, present more environmentally friendly ways to produce bio-fuel. The policy focus should now turn to raising the non-cane contribution to the ethanol mix, by incentivising both public and private players to set up second-generation ethanol facilities.

Published on April 08, 2021

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