Ethanol Production Boost in India Introduction 

• In a major step toward sustainable energy, the Indian government has lifted all restrictions on ethanol production from sugarcane juice, sugar syrup, and molasses for the 2025-26 fiscal year. 
• This decision underlines India’s commitment to increasing the ethanol blending target in petrol to 20% by 2025, with potential plans to push it further to 30% in the future.

Ethanol Blending Programme

• The Ethanol Blended Petrol (EBP) Programme was launched in January 2003.
• Its primary objectives are to:
  • Reduce vehicular pollution.
  • Conserve foreign exchange by lowering crude oil imports.
  • Support the sugar industry through ethanol sales, enabling it to clear sugarcane farmers’ arrears.
• Programme targets:
  • 10% blending (E10) to be achieved by 2021–22.
  • 20% blending (E20) targeted for 2025–26.

Sources of Bio-Ethanol Production in India

• Sugarcane: Sugarcane provides three related products in the order of decreasing sugar content:
  a. Sugarcane juice and syrup
  b. B-heavy molasses
  c. C-heavy molasses
  • While sugarcane juice, syrup, and B-heavy molasses are typically used for sugar production, they have also been diverted to ethanol production.
  • In December 2023, the government restricted diversion of sugarcane juice, syrup, and B-heavy molasses to protect domestic sugar stocks.
• Maize:  The use of maize for ethanol production has been scaled up to compensate for the restrictions placed on sugarcane-based feedstock.
• Surplus Rice and Damaged Food Grains: The government permits the use of surplus rice and damaged grains as feedstock in grain-based distilleries for ethanol production.

Significance of the Ethanol Blending Programme

• Strengthening India’s Energy Security: 
  • India is heavily dependent on crude oil imports, with import dependence exceeding 87%.
  • Such high dependence makes the country vulnerable to disruptions from global events like the Russia-Ukraine war or production cuts by OPEC nations.
  • The ethanol blending initiative reduces reliance on imported oil and thereby enhances India’s overall energy security.
• Promoting Import Substitution: 
  • By blending ethanol with petrol, India strategically reduces dependence on imported fossil fuels while conserving foreign exchange reserves.
  • Over the past decade, blending has led to savings of more than ₹1.4 lakh crore.
  • At a blending level of E20 (20% ethanol), annual savings are projected at $4 billion, providing a direct boost to the current account balance.
• Cutting Down Emissions: 
  • Ethanol-blended fuels emit fewer pollutants compared to conventional petrol, including reduced levels of carbon dioxide, carbon monoxide, hydrocarbons, and particulate matter.
  • According to NITI Aayog, a 20% ethanol blend in petrol can cut carbon monoxide emissions by 50% in two-wheelers and by 30% in four-wheelers.
• Supporting Rural Economy and Farmers’ Income: 
  • The programme creates an assured market for crops such as maize and paddy, which strengthens the rural economy.
  • Between 2015 and 2022, Oil Marketing Companies (OMCs) paid around ₹81,796 crore to sugar mills for ethanol supplies.
  • This financial support enabled mills to clear sugarcane farmers’ arrears, directly benefiting farmer livelihoods.
• Generating Employment:  The Asian Development Bank (ADB) estimates that the ethanol blending programme could generate approximately 18 million rural jobs in India, contributing to employment and income opportunities in rural areas.

Challenges to Ethanol Blending Programme in India

• Engine Compatibility: 
  • While most newly manufactured cars are compliant with E20 fuel, older vehicles are not.
  • Using higher ethanol blends in incompatible engines can lead to damage in engine components and fuel systems, creating concerns among consumers.
• Lower Energy Density: 
  • Ethanol has a lower calorific value compared to petrol.
  • As blending percentages rise, fuel efficiency decreases, resulting in reduced mileage for vehicles.
• Dispensing Infrastructure: 
  • Petrol pumps need to upgrade facilities to store and dispense ethanol-blended fuels.
  • The high capital investment required for such infrastructure upgrades is a significant obstacle for fuel station owners.
• Financial Weakness of Sugar Mills: 
  • Many sugar mills lack the financial capacity to invest in biofuel plants.
  • Their concentration in limited regions further creates imbalances in ethanol availability across the country.
• Barriers in Inter-State Movement of Ethanol: 
  • Despite amendments to the Industries Development and Regulation Act, only 14 states have adopted the revised provisions.
  • This restricts smooth transportation of ethanol, leaving ethanol-surplus states unable to supply ethanol to deficit states.
• Concerns over Food Security:
  • Diverting food crops like rice for ethanol production undermines India’s food and nutritional security.
  • For instance, in 2022, nearly 1 million metric tonnes of rice from the Food Corporation of India’s stock, fit for human consumption, was sold at subsidised rates for ethanol production.
• Diversion of Agricultural Land: 
  • High blending targets may encourage shifting farmland from food crops to biofuel crops like sugarcane, maize, or oilseeds.
  • This can reduce the area available for food production, impacting food security.
• Impact on Water Availability: 
  • Crops like sugarcane and rice are highly water-intensive.
  • According to TERI, an additional 400 billion litres of water would be required to meet ethanol blending targets, which could worsen agricultural water stress.
• Impact on Soil Health: 
  • Monocropping of biofuel feedstock such as rice and sugarcane depletes soil nutrients.
  • Over time, this practice can lead to declining soil fertility and reduced productivity.
• Rising Maize Imports: 
  • The restriction on using sugarcane juice, syrup, and B-heavy molasses for ethanol, due to concerns of falling sugar stocks, has increased reliance on maize.
  • Imports of maize grew from $39 million in 2022-23 to $103 million in 2024.
  • As per NITI Aayog estimates, around 4.8 million hectares will need to be added for maize cultivation to achieve the E20 target—nearly half of India’s current maize cultivation area.
• Higher Import of Agricultural Crops: Using maize for ethanol blending raises the import bill and adversely impacts sectors dependent on maize, such as poultry and livestock feed industries.

Way Forward

• Diversifying to Advanced Biofuels: 

• • • Second and Third Generation Biofuels (2G & 3G): Moving beyond conventional ethanol, India should focus on biofuels derived from agricultural residues and non-food biomass such as rice straw, cotton stalks, and corn husks.
    • Food Security Consideration: Using non-food feedstocks mitigates risks to food supply while ensuring energy security.
    • Farmer Benefits: Monetizing agricultural waste provides additional income streams for farmers and reduces environmental waste.

• Strengthening Logistics and Storage Infrastructure: 

• • • Storage Facilities: Investment in dedicated ethanol storage is needed to manage the rising production.
    • Transportation Network: Improving road, rail, and pipeline infrastructure will ensure efficient movement of ethanol from production units to blending stations.
    • Supply Chain Optimization: Facilitating inter-state ethanol movement and long-term contracts with Oil Marketing Companies (OMCs) will reduce bottlenecks and stabilize supply.

• Ensuring Vehicle Compatibility: 

• • • Automotive Industry Collaboration: Continuous collaboration between the government, oil companies, and vehicle manufacturers is essential for E20 (20% ethanol blend) readiness.
    • Incentivizing Consumers: The government can encourage adoption by offering subsidies or tax incentives for consumers purchasing ethanol-compatible vehicles.
    • E20 Compliant Vehicles: Accelerated production of flex-fuel vehicles will increase fuel compatibility and consumer confidence.

• Expanding Distillery Capacity: 

• • • Grain-Based Distilleries: NITI Aayog’s roadmap emphasizes increasing ethanol production capacity from 258 crore litres to 740 crore litres.
    • Interest Subvention Programmes: Government-backed subsidized loans for establishing new distilleries and upgrading existing facilities can accelerate production.

• Promoting Sustainable Agriculture Practices:

• • • Maize-Sugarcane Rotation: Encouraging maize cultivation in rotation with sugarcane ensures soil fertility is maintained while diversifying feedstock.
    • Water Efficiency: Maize is less water-intensive, supporting sustainable crop practices alongside sugarcane production.

• Pricing and Market Incentives: 

• • Fuel Ethanol Pricing: Providing higher price support for fuel ethanol reduces its diversion to liquor production and ensures profitability for producers.
  • Market Stability: Competitive pricing encourages investment in ethanol production and strengthens the domestic biofuel market.