The Ethanol Blending Programme (EBP), the flagship initiative under India’s National Biofuel Policy - 2018, has been highly successful in achieving and even surpassing its targets. In the current year, we are on the verge of reaching the targeted 20% blending level. With an installed capacity of more than 1,800 crore litres, and considering the expected higher sugarcane production in ESY 2025-26, removal of restrictions on sugar diversion for ethanol production, and good availability of maize and surplus FCI rice, we are now approaching a scenario where the offtake of ethanol may become the limiting factor rather than production capacity. This situation is likely to continue in future also.
The National Bio-Fuel Policy – 2018 and the Ethanol Blending Programme have indeed been the saviour for the Indian sugar sector because it came at a time when the sugar prices had plummeted to an alarming low level and there was no other revenue earning avenue for the sector. However, the EBP policy encompassing committed purchases by the OMC’s at Govt. declared assured purchase prices of different feed stocks which came as a game changer. The policy also mandates releasing of payment within 21 days of supply. The clubbed result of this is improved cash flow and liquidity enabling sugar mills to release timely cane payment to the farmers.
To sustain the momentum, the focus must now shift towards:
= Accelerating the rollout of flex-fuel vehicles and related infrastructure.
= Encouraging R&D for cost-effective production of Sustainable Aviation Fuel (SAF) and green hydrogen from ethanol.
= Exploring and promoting export opportunities of Ethanol in the interim.
The above focus would help long term sustainability of ethanol production and encourage fresh investment in distilleries, ZLD system and modernizing to enable Year Round operations. However, the need of the hour is to link the ethanol prices with sugarcane prices. It is indeed surprising and concerning that ethanol procurement price from “B” Heavy molasses and sugarcane juice / syrup have remained stagnant for the last 2 years despite the sugarcane prices having been continuously risen.
I see a ray of hope in linking ethanol prices in line with rise in raw material price, which is reflected in the recent tender published for Q1 in which the rise in FCI price has been computed in giving higher ethanol prices. So it is logical to expect similar level playing field for increasing ethanol price in line with rise in sugarcane price.
While, the industry is ready with excess capacity of almost 650 crores litres , we anticipate encouragement from Govt. in increasing current EBP level of 20% to 27% in line with the roadmap prepared by Niti Aayog and also explore possibilities of 5% blending with diesel. Similarly, G-20 success in forming Global Bio-fuels Alliances has opened up opportunity for exporting ethanol to the new members of Global Bio-fuel Alliance.
Though sugar sector is projected to have allotment of 44% (YoY + 8%) of the total 1050 crores ltrs. in the tender published for Q1, the mute question is when the ex-mill sugar prices getting stabilized around Rs. 39-40 per kg., how many sugar distilleries would really be going in for ethanol production if the price revision is not done immediately ? Some food for thought !!
By Prakash Naiknavare
(The writer is Managing Director, National Federation of Cooperative Sugar Factories Ltd.)
(The content of this article reflects the views of writer and contributor, not necessarily those of the publisher and editor. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Delhi/New Delhi only)
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