By Amit Kapoor and Mukul Anand
Developing and expanding sustainable energy sources is essential to transitioning to a robust low-carbon economy. In this context, ethanol, one of the principal biofuels, is strategically important to India. With the government’s ambitious goal of achieving 20% ethanol blending (E20) by 2025, efforts are needed to recalibrate the supply of raw materials to support ethanol production.
At the India Bio-Energy & Tech Expo 2024, Shri Hardeep Singh Puri, the Union Minister for Petroleum & Natural Gas, underscored the significant strides made in India’s ethanol blending program. The program, which saw the ethanol blending percentage surge from 1.53% in 2014 to 15% in 2024, has already yielded substantial benefits. These include ₹99,014 crores in foreign exchange savings, a reduction of 519 lakh metric tonnes in CO2 emissions, and the substitution of 173 lakh metric tonnes of crude oil. Moreover, the Bio E3 policy, approved by the Union Cabinet last month, underscores the importance of capturing and storing carbon and utilising biomass for achieving Net Zero targets.
Sugarcane, corn and rice are the primary raw materials used to produce ethanol all over the world. In India, the National Policy on Biofuels-2018, with its amendment in 2022, currently includes the following items as raw material for ethanol production: C & B – Heavy Molasses, sugarcane juice, sugar, sugar syrup, biomass in the form of grasses, agricultural residues (rice straw, cotton stalk, corn cobs, sawdust, bagasse, etc.), sugar-containing materials like sugar beet, sweet sorghum, etc., and starch-containing materials such as corn, cassava, rotten potatoes, agro-food/pulp industry waste, damaged food grains like broken rice, food grains unfit for human consumption, food grains during surplus phase as declared by the National Biofuel Coordination Committee, industrial waste, industrial waste off-gases, algal and cultivation of seaweeds. Despite expanding the list of permissible raw materials for ethanol production, finding an optimal raw material mix has been challenging due to the complexities involved, leading to several policy formulation challenges.
In January, oil marketing companies (OMCs) raised the price of corn-based ethanol by ₹5.70 to ₹71.86 per litre to compensate for reduced sugar-based ethanol production after the government banned the use of sugarcane juice and syrup to maintain domestic sugar supplies amid last year’s drought. This policy shift increased corn demand, turning India from a net exporter to a net importer.
In the previous year, 2023-24, India exported $444 million of corn while importing $39 Million, per Ministry of Commerce and Industry data. Corn exports are merely $46 million in the current year, while imports have already touched $103 million, far exceeding the previous years. Myanmar has become a significant corn exporter to India, with exports totalling $64.73 million in the current year, up from $0.19 million in 2023-24. Corn imports from Ukraine have touched $36.05 million in the current year compared to $30.22 Million last year. Overall, India currently has a $57 million trade deficit in corn trade compared to a $405 trade surplus in the last year, 2023-24.
Over the past few months, as domestic corn prices have exceeded global, India’s poultry sector has struggled with rising feed costs as per industry associations (such as Compound Livestock Feed Manufacturers’ Association and All India Poultry Breeders Association), market research agencies, and key market players. Feed is the most considerable expense in poultry production, making up over 60% of input costs, with corn as the main ingredient, comprising up to 65% of the feed. In response, industry groups are calling for importing 5 million tonnes of duty-free corn and approval of genetically modified corn for feed purposes, as current import duties are as high as 50%. Additionally, farmers are shifting from soybean to corn cultivation due to higher returns, creating challenges for small poultry farmers who are now forced to reduce production and find alternative feed ingredients to manage costs.
Besides corn, rice also witnessed adverse conditions, with additional dilemmas arising regarding its competing usage for food and fuel. A report by Arcus Policy Research mentioned that in 2022, about 1 million tonnes of FCI rice was sold to distillers at subsidised rates for ethanol production. In July 2023, the supply of broken and surplus rice for grain-based ethanol makers through the FCI was halted. This announcement came after the ban on the export of non-basmati white rice on 20 July 2023 to contain rising domestic prices. Last month, the government permitted the sale of up to 2.3 million tonnes of rice FCI stocks to grain-based ethanol distilleries between August and October 2024 under the Open Market Sale Scheme due to surplus rice stocks exceeding 54 million tonnes. Such supply shocks are further exacerbated by constraints such as erratic rains and droughts associated with paddy cultivation in India and the country’s continued fight against malnutrition among children.
In the face of climate change, energy security threatens India, as it is one of the fastest-growing economies in the world and simultaneously the most populous. India reached its E-12 ethanol blending target in April 2023, aiming for E-20 by 2025. However, it faces challenges in raw material procurement as current ethanol production from molasses and grains is insufficient to meet the E20 target. It’s crucial to ensure steady access to raw materials for ethanol production while considering other industries’ needs and the impact on food security.
To address these concerns, India is moving towards second-generation (2G) bioethanol, which uses agricultural waste as a sustainable feedstock, utilising 500 million tonnes of agricultural waste annually produced in India. In March 2019, the Government introduced the “Pradhan Mantri JI-VAN” to support advanced biofuel projects financially. Additionally, two second-generation refineries have been established in Panipat and Numaligarh to convert agricultural residues such as parali and bamboo into ethanol.
Additionally, strategic land planning is also essential. India lost about 5 million hectares of arable land between 1978-79 and 2018-19, while fallow lands increased by 4.3 million hectares during the same period, as per a report published by Arcus Policy Research. Without proper land planning, expanding fuel crops could reduce land available for food crops. Reviving fallow lands for fuel crops can enhance ethanol output without reducing the area under food crops. This approach can help balance the needs of ethanol production with other industries and maintain food security, ensuring a more predictable and sustainable supply of raw materials for ethanol.
The article was published with Financial Express on October 12, 2024.
