India was able to achieve its highest ever ethanol blending average of 8.1 percent with petrol in FY2021 with around 90 percent of ethanol getting sourced from sugar feedstock.
India’s bio-fuel manufacturers are upbeat about the government’s push to blended fuels as that will only encourage the transition towards cleaner fuel, even though it would affect those in areas where blended fuel is not readily available. Dr Pramod Chaudhari, Founder Chairman of Praj Industries says, “ Tax on unblended fuel is a great start to promote the transition to greener fuels and is in line with the global practice of differential pricing for ethanol-blended fuel.” Praj Industries recently inked an MoU with IndianOil to explore opportunities avenues such as the production of alcohol to Jet (ATJ) fuels, 1G & 2G Ethanol, compressed biogas (CBG) and related opportunities in the Biofuels industry.
India was able to achieve its highest ever ethanol blending average of 8.1 percent with petrol in FY2021 with around 90 percent of ethanol getting sourced from sugar feedstock. In the ethanol supply period of 2020-2021 (December-November), a total of around 302 crore litres of ethanol was supplied to oil marketing companies (OMC) by distillers. The government has set a target of blending petrol with 10 percent ethanol by 2022 before enhancing it further to 20 percent by 2025. To encourage fuel blending, the government hiked the price of ethanol extracted from sugarcane by up to Rs 1.47 per litre for FY2022. It has also reduced the GST on ethanol meant for blending under the Ethanol Blended Petrol (EBP) programme to 5 percent from 18 percent.
The EBP programme, called E20 can potentially create additional opportunities to generate over 10 billion liters per annum of ethanol capacity. Its implementation, if successful, will help in saving foreign exchange worth Rs 30,000 crore annually. India, which sources over 80 percent of its fuel needs through imports, spends close to $101.4 billion annually on crude oil imports.
According to industry insiders, while ethanol blending continues to make consistent improvement with each passing year, the level of blending in diesel remains very low at 0.1 percent even though the government mandate is for upward of 5 percent.
A senior executive at an oil PSU says that differential pricing is meant to push all the stakeholders including OMCs to hasten the shift towards blended fuels. However, it would impact customers who stay in regions where blended fuel is not readily available at present. For example, blended petrol is relatively easily available in ethanol producing states such as Maharashtra, Gujarat, UP amongst others, it becomes difficult to source in certain other states including in Rajasthan, Bihar where sugarcane production is low or negligible.
Flex fuel engines
OMCs are getting into ethanol production to hasten the shift to blended fuel. Hindustan Petroleum Corporation Ltd (HPCL) is constructing a second-generation ethanol bio-refinery at Bathinda, Punjab with 100 KL/day ethanol production capacity, and a compressed biogas (CBG) production plant of 15 MT/day capacity at Badaun, Uttar Pradesh. Both projects will have biomass as feedstock and are expected to be commissioned in fiscal 2023.
OEMs such as Toyota, Hyundai and (Maruti) Suzuki are open to bringing in flex fuel engines that can use blended fuel. Union minister Nitin Gadkari has said flex-fuel engines require just a few small modifications in the engine's filtering system. "Flexed engines can also be run as hybrid EV," said Gadkari, referring to the Toyota Camry which is a self-charging hybrid vehicle.
As Gadkari puts it, India is looking to emulate the success of countries such as Brazil, Canada and the US which have successfully launched their EBP programmes. Brazil's collaboration with OEMs has resulted in 73 percent of all new vehicles now getting sold come with flex-fuel engines. The country has current EBP levels of 27 percent.
The proposal to levying additional excise on unblended fuels seems to have provided an impetus to new age biofuel start-ups. Mumbai-based Aris BioEnergy plans to set up at least 20 odd plants for conversion of used cooking oils (UCO) into biodiesels. The company has signed a JV with UK-based biodiesel tech company, Green Fuels, to produce biodiesel.
(This article has appeared in the February 15 2022 issue of Autocar Professional)
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