What is Ethanol Blending and Why India is Pushing it?

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  • Post last modified:June 6, 2022
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Ethanol Blending is a mixing process of ethyl alcohol that is at least 99% pure, derived from agricultural products blended with petrol.

what-is-ethanol-blending-and-why-india-is-pushing-it
Ethanol Blending Petrol

Background:

For the past two decades, India has been working to create an ecosystem that will enhance the amount of fuel-grade ethanol mixed into gasoline for use in vehicles, notably two and four-wheelers, under the Ethanol Blended Petrol (EBP) Program.

Multiple benefits of the EBP have been more apparent in recent years, owing to uncertain international energy markets and a growing focus on the decarbonization of transportation fuels.

Prior to the EBP, India’s sugar mills were reliant on central government quotas for the sale of sugar, which was then a restricted product.

Each sugar mill was assigned a quota for the year. The Government of India (GOI) issued a monthly order that allowed sugar mills to sell their product on the open market. Each sugar mill was also given a limited quota of sugar from the Public Distribution System (PDS).

Sugar was made from cane juice and B-heavy molasses in sugar mills. The juice was taken from sugarcane grown by sugarcane farmers in each sugar mill’s allocated catchment region, as determined by the government.

B-Heavy Molasses remained as a co-product after the juice was treated in the sugar mill and refined sugar was recovered. The B-Heavy Molasses were transformed to C-Heavy Molasses after another sugar extraction cycle.

The sugar mills’ C-Heavy molasses were either sold to freestanding distilleries in the same state as the mill or neighboring states for ethanol production, used for their own ethanol production, or exported if international market prices were good.

The realization of profits and cash flows from sugar sales by mills was a challenge in the quota-allocation approach. While the official payment cycle in the PDS system used to be 30 to 60 days after proper verification by the mill, retail market recoveries of outstanding depended on a variety of market circumstances. This put a strain on mills’ payment cycles, which in turn put a strain on farmers’.

To make matters worse, the first decade of the twenty-first century saw multiple years of sugar production in the country that exceeded the country’s needs.

Meanwhile, huge producers like Brazil and bulk users like the EU countries dictated sugar export prices on the international market. This resulted in an unsustainable position of sugar export subsidies from India, putting significant strain on the exchequer as well as WTO negotiations.

The C-Heavy molasses which was a by-product of the sugar industry was used to produce Extra Neutral Alcohol (ENA, 95% to 96% ethanol concentration on a volume-by-volume basis) which is the primary base raw material of India’s liquor industry.

Till 2017, most of the fuel grade ethanol which was being supplied to OMCs was also similarly produced from C-Heavy molasses.

The sugar mills’ supply chain, which includes sugarcane growing, refined sugar manufacturing, molasses, drinkable alcohols, and fuel ethanol, was put under strain as a result of the system’s limits and controls.

The only solution available to sugar mills was to divert the sugar/molasses surplus more towards ethanol production for the Ethanol Blended Petrol (EBP) program, which was in principle attractive because of the increasing demand for blending, shorter payment cycles of OMCs, and visibility of product upliftment, etc.

Initiatives by Govt. of India since 2014 for promotion of Ethanol Blended Petrol (EBP) program: 

Current govt. has brought in various reforms to promote the EBP program. Few are:

  • Sugar decontrolled
  • Price fixation of Ethanol procurement by OMCs since 2014.
  • Publication of National Policy on Biofuels – 2018
  • Amendment in Industrial Development & Regulations Act, from 2017 for free flow of Ethanol in the country which was earlier under control of state govt. similar to liquor.
  • After the introduction of GST in the country, govt.  of India reduced the GST applicable on  Ethanol purchase for blending (18% to 5%)
  • Since 2018, opening an alternate route for ethanol production i.e. Ethanol manufactured from different feedstocks to increase the availability of Ethanol domestically (i.e. Sugar Cane Juice, Sugar and Sugar Syrup, B Heavy Molasses, C Heavy Molasses, Damaged Food Grain unfit for human consumption, Surplus Rice and Maize)
  • Introduction of interest subvention for enhancement, augmentation of ethanol production capacity in the country thru Dept. Of Food & Public Distributions.
  • Long term contracts between Ethanol suppliers & OMCs as per the long-term Ethanol procurement policy of MOPNG.
  • Release of Report of Expert Committee on Roadmap for Ethanol Blending in India by 2025 on 5ht June 2021.
  • Allow sale of E100 as transportation fuel on a pilot basis in Pune, Maharashtra from 2021.

OMCs perspective on Ethanol Blended Petrol (EBP) program: 

Due to the scarcity of domestic crude in the country, OMCs are heavily reliant on imported crude to meet the country’s demand for gasoline and diesel.

In 2006, OMCs began blending Ethanol in the country on a trial basis, with 5% blending in sugar surplus states depending on Ethanol availability. The supply of ethanol in the country has improved over time as a result of government action.

During the current Ethanol supply year (i.e. Dec’21 to Nov 22) the availability of OMCs is likely to touch 450 Crore liters. As the availability of Ethanol is increase the equivalent amount of crude (used for Petrol production) import is reduced.

Roadmap of Ethanol Blending in India: 

Govt. of India 5th June’21 has released a report of Expert Committee on Roadmap for Ethanol Blending in India by 2025. As per the roadmap, 20% Ethanol blending is to be achieved by 2025 in a phased manner as under

YearPan India EBP%
2021-2210%
2022-2312%
2023-2415%
2024-2520%
2025-2620%

Due to the above initiatives of Govt. of India, the availability of Ethanol has improved since 2014 and has gone up from 67 Crore liters to around 450 Crore liters in the current Ethanol supply year. This has resulted in a significant improvement in cumulative Ethanol blending percentage from 2.33% in 2014 to 10.00% as of May 26, 2022.

In order to meet the gap between current availability and the future requirements of Ethanol for the EBP program, Oil Marketing Companies, under the guidance of MOPNG & DFPD, are encouraging the new entrepreneurs to set up dedicated ethanol plants in the state where Ethanol availability from Sugar-based feedstocks is low.

OMCs have now signed long-term agreements offering offtake assurance to 131 upcoming dedicated ethanol plants which will augment ethanol production capacity by Approx. 750 Cr. Ltr. per Annum. The investment in these plants will be around 40,000 Crores and employment generation for the country will be around 3 lac jobs.

This is expected to improve ethanol availability and help in achieving the blending targets set for the country.

The above plants are majorly grains (not for human consumption) based plants, which shall bring flexibility to the ethanol availability from various feedstocks. This shall not only check the dependence of OMCs on Sugar/molasses-based ethanol but also reduce the burden on water resources of the country due to the switch from molasses-based ethanol production to grain-based ethanol production.

This increase in Ethanol Procurement by around Rs. 47000 Crores will lead to an increase in farmers’ income.

Ethanol Blending of 1016 Cr. lit considering 20% blending by 2025, will result in savings of 200 Lakh MT of GHG emissions.

In line with the blending targets, Oil Marketing Companies are augmenting the blending infrastructure and have also initiated the movement of Ethanol blended Petrol and Pure Ethanol by Tank Wagons.

OMCs are also setting up 2nd Generation Ethanol production plants. These plants use paddy straw as raw material to produce ethanol. Currently, this paddy straw in the country is getting burnt in the fields which results in air pollution in the surrounding areas.

Since this 2nd Generation Ethanol production technology is new in the country, Govt. of India has introduced Pradhan Mantri JIVAN Yojna to provide VGF (Viability Gap Funding) to the plants being set up in the country.

With an investment of roughly Rs. 8,000 crore, OMCs are constructing five 2G bio-refineries. By diverting paddy straw for the manufacturing of ethanol to these Biorefineries, these Biorefineries will help to reduce stubble burning in farmlands around the country.

Future uses of Ethanol

Ethanol being a pure chemical has existing uses like portable liquor, blending in Petrol, Pharmaceuticals, etc.

Ethanol was available in a variety of grades and applications, ranging from drinkable alcohol to Indian-Made Foreign Liquor (IMFL) to industrial alcohol utilized as a bulk ingredient in the manufacturing of specialized chemicals.

In ethanol-based cooking stoves, ethanol has the potential to be used as cooking fuel. It can also be used to generate green hydrogen. Ethanol can also be used to make Bio-ATF, which is a more environmentally friendly alternative to aviation turbine fuel.

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