ETHANOL BLENDING PROGRAMME: IMPACT OF RECENT DIRECTIVES

TAG: GS 3: ECONOMY, GS 3: ECOLOGY AND ENVIRONMENT

THE CONTEXT: Recently, the Ministry of Consumer Affairs, Food and Public Distribution directed all mills and distilleries not to use sugarcane juice/syrup for making any ethanol “with immediate effect”.

EXPLANATION:

• This directive is a setback for companies that had invested in facilities to produce ethanol directly from cane juice/syrup, affecting their operations.
• The Ethanol Blending Programme (EBP) aimed to reduce dependence on imported fossil fuels by blending ethanol extracted from agricultural resources into petrol.
• This initiative has seen notable success, with ethanol blending in petrol rising significantly from 1.6% in 2013-14 to 11.8% in 2022-23.

Feedstock Diversification and Differential Pricing

• The increase in ethanol production was fuelled by diversification in feedstocks.
• Previously reliant on sugarcane-based feedstocks, the program expanded to include B-heavy molasses, concentrated sugarcane juice, surplus rice from FCI stocks, damaged food grains, and maize.
• Differential pricing policies, introduced by the government, incentivized ethanol production from alternative feedstocks by offering higher prices for ethanol produced from sources other than C-heavy molasses.

Impact on Supply and Blending Targets

• The directive has implications for the supply of ethanol to Oil Marketing Companies (OMCs), affecting their ability to meet blending targets.
• OMCs received offers for ethanol supply for 2023-24, with a significant portion (135 crore litres) coming from ethanol produced from sugarcane juice/syrup.
• The restriction could lead to stranded capacities and impact the achievement of blending targets, set at 15%.

Shift in Feedstock and Pricing Policy

• Industry experts anticipate a shift in ethanol production from a reliance on sugarcane-based feedstocks to greater utilization of grains due to the government’s supportive pricing policies.
• These policies have encouraged diversification and reduced dependence on a single feedstock or crop for ethanol production.

Concerns Over Sugar Supply

• The directive limiting sugarcane juice/syrup for ethanol production is tied to concerns over sugar supply.
• The sugar year ended with low stocks, and uncertainties over production for the current year further compound the situation.
• Anticipated declines in sugar production in key states like Maharashtra and Karnataka due to inadequate rainfall and low reservoir levels add to the apprehension.

Government Prioritization: Food Over Fuel

• The recent directives, coupled with the ban on sugar exports, signal the government’s prioritization of domestic food supply over ethanol production.
• This stance underscores a preference for ensuring adequate food availability for consumers over prioritizing fuel production.

ETHANOL BLENDING PROGRAMME:

• Ethanol Blended Petrol (EBP) programme was launched in January, 2003 with a target of blending 5% ethanol with petrol by 2010.
• The target was subsequently revised to 10% by 2022 and 20% by 2030.
• The programme sought to promote the use of alternative and environment friendly fuels and to reduce import dependency for energy requirements.

Conclusion

• The recent restrictions on using sugarcane juice/syrup for ethanol production have significant ramifications for the ethanol blending program in India.
• They not only impact the supply of ethanol but also highlight the government’s prioritization of food security over fuel production, reflecting concerns over sugar stocks and production uncertainties in the agricultural sector.
• The industry may see a shift towards alternative feedstocks and pricing strategies to navigate these challenges in achieving ethanol blending targets set by the government.

SOURCE: https://indianexpress.com/article/explained/food-versus-fuel-whats-happening-with-centres-ethanol-blending-scheme-9062757/