Coasting on Ethanol
The vehicle population in India is around 22 crore two and three wheelers and about 3.6 crore four-wheelers (according to Society of Indian Automobile Manufacturers (SIAM). The two wheelers account for 74 per cent and passenger cars around 12 per cent of the total vehicle population on the road.
The two-three wheelers consume 2/3rd of the gasoline by volume, while 4 wheelers consume balance 1/3rd by volume. The growth rate of vehicles in this segment is pegged at around 8-10 per cent per annum. Based on expected growth in vehicle population, NITI Aayog, which has come up with a report titled ‘Roadmap for Ethanol Blending in India 2020-25’ on World Environment Day (June 5, 2021) noted that an estimated ethanol demand of 1016 crore litres by 2025.
The report noted that modelling exercise on expected penetration of electric vehicles estimates the ethanol demand for petrol blending in the range of 722-921 crore litres in 2025. However, an optimistic demand for ethanol (1016 crore litres) to ensure that the objectives of E20 are met by 2025. The current ethanol production capacity in India of 426 crore litres derived from molassesbased distilleries, and 258 crore litres from grain based distilleries is proposed to be expanded to 760 crore litres and 740 crore litres respectively. This would be sufficient to produce 1016 crore litres of ethanol required for the Ethanol Blended Petrol (EBP) Programme and 334 crore litres for other uses. This will require 60 lakh metric tonnes (MT) of sugar and 165 lakh MT of grains per annum in Ethanol Supply Year (ESY) 2025 to be used for producing ethanol, which the country can support. On November 10, the Cabinet Committee on Economic Affairs gave its approval for fixing higher ethanol prices derived from different sugarcane-based raw materials under the EBP Programme for the forthcoming sugar season 2021-22 during ESY 2021-22 from December 1, 2021 to November 30, 2022. With this, the price of ethanol from C heavy molasses route will be increased from Rs 45.69/litre to Rs 46.66/ litre; the price of ethanol from B heavy molasses route be increased from Rs 57.61/ litre to Rs 59.08/ litre; the price of ethanol from sugarcane juice, sugar/sugar syrup route be increased from Rs 62.65/litre to Rs 63.45/litre.
It may be noted that the government has notified the administered price of ethanol since 2014. For the first time during 2018, differential price of ethanol based on raw material utilised for ethanol production was announced by the Government. These decisions have significantly improved the supply of ethanol thereby ethanol procurement by Public Sector Oil Marketing Companies (OMCS) has increased from 38 crore litre in Ethanol Supply Year (ESY) 2013-14 to contracted over 350 crore litre in ongoing ESY 2020-21. In the year 2017-18, installed capacity of molasses-based distilleries in India was around 278 crore litres. To enhance ethanol production capacity in the country, the government in July, 2018 and March, 2019 notified two interest subvention schemes for molasses-based distilleries. The Department of Food and Public Distribution (DFPD) approved 368 projects for setting up of new distilleries / expansion of existing distilleries. Loans amounting to about Rs 3600 crore have been sanctioned by banks to 70 sugar mills so far; 31 projects have been completed creating a capacity of 102 crore litres as a result. The capacity of molasses-based distilleries has reached to 426 crore litres. 39 more projects with capacity of 93 crore litres are likely to be completed by March, 2022 which will bring cumulative capacities to about 519 crore litres.
To achieve blending targets, DFPD is making concerted efforts to enhance the ethanol distillation capacity in the country. Thus far, 238 projects for a capacity enhancement of 583 crore litres with a loan amount of about Rs 16,000 crore have been approved by DFPD. It is expected that at least 400 crore litres capacity would be added from these projects by 2024.
All these would facilitate ease of doing business and achieve the objectives of Atmanirbhar Bharat initiatives.