The Government of India under the aegis of the Department of Food and Public Distribution (DFPD) is working on a target to blend 10% Fuel-grade Ethanol with Petrol by the year 2022 and an even greater increase of 20% by 2025. This is being undertaken with a vision to boost the agricultural economy, reduce dependence on imported fossil fuel, save foreign exchange on account of crude oil import bill & reduce air pollution.

In addition to this, the Government aims is to support the sugar sector in the interest of sugarcane farmers by allowing the production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar while also encouraging sugar mills to divert excess sugarcane to ethanol. 

It has been estimated that in the current sugar season 2020-21, more than 20 LMT of excess sugar will be diverted to ethanol as compared to the diversion of  9 LMT of sugar to ethanol in the last year’s sugar season, 2019-20. 
Furthermore, by 2025 the target is to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve the liquidity of mills, thereby helping in the timely payment of cane dues of farmers.    

About Rs. 22,000 Crore revenue was generated by sugar mills/ distilleries from the sale of ethanol to  Oil Marketing Companies (OMCs) in the past 3 sugar seasons.

Alternatives to Boost the Production of Fuel-grade Ethanol

The Government of India has permitted the use of maize, and rice available with the Food Corporation of India (FCI) for the production of ethanol in an attempt to increase the production of fuel-grade ethanol and to achieve fixed blending targets.

The Government has further administered that rice available with FCI will continue to be made available to distilleries in the coming years. With the extra consumption of surplus food grains, the farmers will be benefitted as they will get a better price for their produce and assured buyers.

The prices of ethanol for maize and rice available with FCI has been fixed at Rs 51.55/litre & Rs 56.87/litre respectively for Ethanol Supply Year (ESY) 2020-21. As for FY 2020 to 2022, the Government has fixed the price of FCI rice to Rs 2000/quintal for the production of ethanol in order to set stability in raw material price and its availability. 

 DFPD modifies Interest Subvention Scheme to Increase Existing Capacities

Distilleries have been given the liberty to choose the nearest FCI depot as per their requirement/logistics for the purpose of supply of surplus rice that will bolster the production of ethanol.

As of 26 April 2021, about 349 Crore litres of ethanol have been allocated by OMCs to sugar mills/ distilleries, out of which contracts of about 302 Crores litres have been signed by distilleries &124 Crore litres supplied. Efforts are being made by DFPD &MoPNG / OMCs to reach the blending target in ESY 2021-22, with a target to supply more than 400 Crore litres of ethanol to OMCs to achieve 10% blending.

In order to increase the existing capacities further, DFPD has modified the interest subvention scheme on 14 January 2021 to set up new grain-based distilleries and expand existing ones which are dual-feed & molasses-based distilleries, to produce ethanol & production of ethanol from other 1G feedstocks.

Till date 422 proposals with a capacity of 1684 Crore litres for a loan amount of Rs. 42000 crore have been approved by DFPD which is likely to produce more than 600 Crore litres within the next 2 to 4 years. Hence, the ethanol distillation capacity from these projects and ongoing projects are expected to reach 1500 Crore litres by 2024-25. This can be sufficient to achieve the 20% blending target.

Production of Ethanol for Diversification of Excess sugar and to Increase Farmer’s Income

Sugarcane and ethanol are produced mainly in three states - Uttar Pradesh, Maharashtra and Karnataka and transportation of ethanol to distant States from these three comes with a huge transportation cost. Therefore, bringing new grain-based distilleries across the entire country would result in the distributed production of ethanol and could save huge transportation cost preventing delays in meeting the blending target while also benefitting the farmers across the nation.

There is sufficient availability of feedstocks in the country for the production of ethanol, therefore, the Government has fixed remunerative prices of ethanol derived from various feedstocks. 

Moreover, since OMCs are the assured buyer of ethanol, there is a comfort for the purchase of ethanol from distilleries for the next 10-15 years. 
In addition to this, the Ministry of Environment, Forest & Climate Change has also streamlined the process of getting environment clearance (EC) for ethanol projects while the Department of Financial Services and State Bank of India have further issued Standard Operating Procedure (SOP) for sanctioning and disbursal of loans for ethanol projects which would expedite the sanctioning process.

The Production of ethanol is significant since it would not only facilitate diversion of excess sugar to ethanol but will further encourage farmers to diversify their crops to cultivate particularly maize/corn which needs lesser water. 
This also aids the cause of Atmanirbhar Bharat as the production of ethanol from various feedstocks will help in achieving blending targets of ethanol with petrol thereby reducing import dependency on crude oil.