The Central government has recently permitted surplus rice stocked at Food Corporation of India (FCI) to be used for production of ethanol, which in turn can be blended with petrol for automotive use. The development seems significant considering that India, which has 21 of the world's 30 most polluted cities, is struggling to reach its mandated blend of 10 percent ethanol in petrol by 2022. The 2030 target is to double the blending percentage to 20 percent.
Government estimates indicate that total production of rice in FY2020 would be a record 117.47 million tons, much more than the five-year average production of 107.80 million tons. The National Biofuel Policy 2018 has allowed use of surplus grain such as rice, wheat, bajra, maize, jowar for ethanol production.
However, the run for rice in ethanol may not exactly be smooth as there are a few issues which need to be ironed out to make ethanol production more viable.
Atul Mulay, president, Bio-Energy Business, Praj Industries.
According to Atul Mulay, president, Bio-Energy Business of Pune-based Praj Industries, the installed capacity in India to produce potable alcohol from grain is around 200 crore litres per annum. “However, operationally it is around 130 crore litres per annum. Due to fluctuations in raw material prices, some plants are financially sick and unable to operate. For an interim duration until normalcy returns, the Ministry of Consumer Affairs, Food and Public Distribution would need to fix the rate of surplus grain in order to make grain to ethanol products more viable.”
Further, due to the 40-plus-day lockdown, the petrol offtake by OMCs has drastically slowed down, resulting in paucity of storage and mixing space spaces for ethanol. This has prompted the Indian Sugar Mills Association (ISMA) to ask OMCs to reallocate ethanol to other depots where the storage is still available or where the ethanol production is deficient.
As per the Petroleum Planning and Analysis Cell (PPAC) of Ministry of Petroleum and Natural Gas, India's ethanol requirement currently stands at about 330-340 crore litres for 10 percent blending with 3,300-3,400 crore litres of petrol. By 2030, the demand for ethanol will likely increase to about 1,000 crore litres for 20 percent blending with 5,000 crore litres of petrol.
However, there is a clear demand-supply mismatch, at least at present. During the first tendering process which took place in August 2019, OMCs in India were looking to procure 5.11 billion litres of ethanol but managed only 1.4 billion litres. A second tender for 2.53 billion litres to make up for the shortfall was floated in January 2020. However, the sugar industry again failed to match the demand and only 0.29 billion liters of ethanol were allocated. A new tender was opened in early March, for 2.53 billion litres. This time the allocation was not more than 31.5 million litres.
Food or fuel?
It is for the first time surplus rice has been notified to be used for ethanol production, albeit damaged and unfit-for-human-consumption rice has been allowed since many years. This decision was not taken until now because of concerns regarding its diversion (similar to other grains) from food supply to fuel blending and in turn leading to scarcity.