India’s Ethanol Conundrum

Syllabus: GS3/ Environmental Pollution & Degradation

In context

• The future of India’s renewables strategy hangs on a delicate food-fuel trade-off.

Ethanol Blending

• Ethanol can be mixed with gasoline to form different blends.
  • Once blended, the ethanol cannot be separated from the petrol.
• As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions and thereby reducing the occurrence of environmental pollution. 
• Since ethanol is produced from plants that harness the power of the sun, ethanol is also considered a renewable fuel.
  • It has a higher octane number than gasoline, hence improving the petrol octane number.

India’s National Biofuel Policy

• Aim:
  • The policy is aimed at reducing dependence on imports by encouraging fuel blending. 
• Key elements: With bioethanol, biodiesel and bio-CNG in focus, its key parts include
  • Ethanol Blending Programme (EBP), 
  • Production of second-generation ethanol (derived from forest and agricultural residues), 
  • Increasing capacity for production of fuel additives, R&D in feedstock, which is the starting material for ethanol production.
  • Financial incentives for achieving these goals.

• Ethanol Blending Petrol (EBP) programme:
  • The Centre promotes the Ethanol Blending Petrol (EBP) programme with the aim of
    • Enhancing energy security, 
    • Reducing import dependency on fuel, 
    • Saving foreign exchange, 
    • Addressing environmental issues and 
    • Giving a boost to agriculture.
• Accomplishments:
  • The ‘National Policy on Biofuels’ notified by the government in 2018 envisaged an indicative target of 20% ethanol blending in petrol by 2030.
    • In 2014 only 1.5 per cent ethanol was blended in petrol in India.
  • Given the encouraging performance and various interventions made by the government since 2014, the 20% target was advanced to 2025-26.
  • The ethanol-blended petrol (EBP) programme has been a significant accomplishment of the current government.
    • The all-India average blending of ethanol with petrol has risen from 1.6% in 2013-14 to 11.8% in 2022-23.

Current scenario of Ethanol Blending in India 

• About:
  • As more than 100 countries at COP28 in Dubai pledged the tripling of global renewable energy capacity by 2030, India faces a tightrope walk with regard to its ethanol blending target. 
• Ethanol production from sugarcane:
  • While ethanol blended petrol (EBP) increased from 1.6% in 2013-14 to 11.8% in 2022-23, the 20% target by 2025 has run into trouble
    • The major reasons being low sugar stocks in 2022-23 and the impending shortfall in sugarcane production this year. 
• Transition to grains-based ethanol:
  • The government is looking at a major transition towards grains-based ethanol for meeting the target. 
  • The recent authorisation of the National Agricultural Cooperative Marketing Federation of India (NAFED) and the National Cooperative Consumers’ Federation of India (NCCF) to procure maize (corn) for supplying ethanol distilleries indicates emphasis on this transition and will boost an organised maize-feed supply chain for ethanol. 
  • This, however, risks creating more challenges for the economy.

Issues & challenges

• Connection with crude prices:
  • The two major feedstock for ethanol production are sugarcane (Brazil) and corn (the U.S.).
    • Ethanol production in both these countries boomed from 2000 when crude oil prices started rising and remained above a certain threshold for a decade.
  • At low crude prices, ethanol blending is not competitive; it is a slow process driven by heavy subsidies. 
• Food-fuel conflict:
  • A crucial difference between the use of sugarcane and corn for producing ethanol is the degree of food-fuel conflict that emerges. 
  • In the case of sugarcane, ethanol is produced by processing the molasses (C-heavy/B-heavy) and constitutes minimal trade-off with the sugar output.
    • The B-heavy molasses path produces less sugar compared to the C-heavy one, but both produce sugar and ethanol simultaneously from sugarcane. 
  • But using corn for producing ethanol directly reduces its use as food or livestock feed. 
  • It not only diverts grain to fuel use, but also links food prices directly with crude oil prices through the demand side.
• Role in 2006-14 global food crisis:
  • Though only 5-7% of the world’s corn output was used for ethanol production at the peak of the U.S.’s corn-based ethanol programme, the price effect was widespread and remained the most important contributor to the 2006-14 global food crisis.
  • More importantly, the high corn prices were quickly transmitted to other grain markets as soft grains, such as wheat/barley, started getting redirected into the livestock industry as corn substitutes. 
  • This was primarily due to the relatively easy substitutability in grain use across food, feed, and fuel.
• Potential challenge to Indian grain markets:
  • According to government estimates, to meet the EBP target by 2025, India needs 16.5 million tonnes of grains annually. 
  • This is a sufficiently high quantity to trigger a short-run price spiral in grain markets.
• Challenge with sugarcane based ethanol production:
  • Unlike in the U.S., sugarcane is the more obvious choice for tropical countries such as Brazil or India where cane yields are higher.
  • More land under water-intensive sugarcane cultivation can displace food production as well as degrade water tables, but these can be regulated by appropriate land-use policies. 

Way ahead

• The future of India’s renewables strategy hangs on a delicate food-fuel trade-off; and a choice between intensifying hunger and reducing fossil fuel use.
  • On the one hand, the government can reconsider its EBP target and stagger it to contain the contradictions. 
  • On the other hand, we need more investment in public infrastructure, urban design to contain the fuel demand for automobiles, and in renewables such as solar power.
• To counter the most genuine fear of loss of food security, India may also shift Focus to next-generation Biofuels like:
  • Grasses and algae; 
  • Cellulosic material such as bagasse, farm and forestry residue, etc.

[Q] The future of India’s renewables strategy hangs on a delicate food-fuel trade-off. Examine. What should be the immediate, intermediate and long-term approach with regard to India’s ethanol blending programme?