Why in News
- India’s ethanol blending programme, initially meant to support sugarcane growers, has increasingly benefited standalone grain-based ethanol producers.
- Investment of ₹40,000 crore in ethanol distilleries has shifted the focus from sugarcane to grains like maize and surplus rice, due to sugar shortages and policy incentives.
- Ethanol blending in petrol aims to reduce oil import dependence, support farmers, and promote cleaner fuels.
Relevance
- GS 3 – Economy: Ethanol blending programme, agro-industrial investment, rural economy, food vs fuel policy.
- GS 3 – Agriculture: Crop diversification, sugarcane economics, grain utilization, government procurement.
- GS 3 – Energy & Environment: Biofuels, renewable energy, emission reduction, energy security.
- GS 2 – Governance & Policy: Implementation of National Biofuel Policy, coordination between OMCs, distilleries, and agricultural stakeholders.
Basic Overview
- Ethanol Blending Programme (EBP): Launched to blend ethanol in petrol, initially targeting sugar mills to provide extra revenue via ethanol production.
- Feedstock Sources:
- Sugarcane (C-heavy molasses, B-heavy molasses, cane juice/syrup)
- Grains (maize, surplus/damaged rice from FCI)
- Government Incentives: Higher prices for ethanol from B-heavy molasses, cane juice/syrup, and grains; excise-duty exemptions for grain-based ethanol.
- Production Mechanism:
- Molasses/cane juice: Sucrose fermentation → ethanol
- Grain: Starch conversion → sugar → fermentation → ethanol
Trends in Ethanol Production
- Supply Increase: Ethanol supplied to OMCs rose from 38 crore litres (2013-14) to 189 crore litres (2018-19).
- Blending Ratio: Increased from 1.6% to over 4% in petrol.
- Grain-Based Ethanol Dominance:
- 2023-24: 672.4 crore litres procured; <40% from sugarcane, >60% from grains.
- 2024-25: 920 crore litres requirement projected; 520 crore litres from grains, 400 crore from sugarcane-based feedstock.
- Maize contributes the majority of grain-based ethanol (~420 crore litres).
Reasons for Grain Dominance
- Sugar Shortage: Plummeting sugarcane output (423.8 lakh tonnes in 2023-24; 331 lakh tonnes projected in 2024-25) limits sugarcane ethanol production.
- Policy Neutrality: Government procurement policy does not distinguish feedstock, so distilleries can supply grains or sugarcane.
- Higher Returns: Ethanol price (₹71–86/litre) exceeds market value of rice, maize, or cane juice.
Economic & Policy Implications
- Investment & Capacity: 499 distilleries with ₹40,000 crore investment, annual capacity 1,822 crore litres; OMCs procurement limited to 1,050 crore litres → potential overcapacity.
- Food vs Fuel Debate: Grain-based ethanol uses maize and rice that could feed humans or livestock, raising concerns about food security.
- Supply Constraints: Ethanol from sugarcane is capped by domestic sugar consumption, while grain ethanol can expand but may affect feed prices for poultry/livestock.
- Market Dynamics: Potential to create new markets for surplus grain but requires careful balancing of agricultural production and domestic consumption.
Wider Implications
A. Energy & Environment
- Supports National Biofuel Policy and petrol blending targets (20%), reducing fossil fuel dependence.
- Ethanol use reduces vehicular emissions and greenhouse gases.
B. Agricultural
- Provides an alternative revenue stream for farmers, especially in surplus grain-producing states (Punjab, Haryana, Bihar, MP, UP, Maharashtra).
- Could influence crop choice and production patterns, with more maize/rice diverted to ethanol.
C. Economic
- Encourages private investment in distilleries and rural industrial growth.
- Risk of oversupply and price volatility if ethanol output exceeds OMCs’ procurement capacity.
D. Policy Challenges
- Need to balance sugarcane, grain, and food security interests.
- Must ensure efficient procurement, blending, and storage infrastructure.
- Managing ethanol pricing and feedstock allocation to avoid inflationary pressures on food and livestock feed.
