Likely spike in ethanol blending to counter disruption by e-vehicles

The emphasis of the Centre and policy think tank NITI Aayog on the adoption of electric vehicles to cut emissions and slash oil import bill is likely to stoke ethanol doping in fuel as well.

The NITI Aayog has proposed that only e-vehicles should be sold in India post 2025. Domestic manufacturers of vehicles, which predominantly run on petrol mixed with ethanol, are now looking at ways to concur with the central government’s environmental agenda without majorly disrupting existing capacities and product mix.

According to industry sources, the union petroleum and road transport ministries have already discussed the roadmap for the targetted 20 per cent doping. Auto manufacturers are facing heat from the e-vehicles segment and supporting higher ethanol blending for environmental reasons and to lessen the blame of higher carbon emissions on petrol vehicles.

Some manufacturers have expressed reservations over the feasibility of higher ethanol blending beyond 10 per cent, claiming it would require engine and other modifications in vehicles. However, the general consensus seems to be tilting in favour of greater ethanol mix. This is likely to accelerate ethanol blending, create more ethanol production capacities and provide a viable solution to sugar market glut as well.

However, spokespersons for Society of Indian Automobile Manufacturers (SIAM) could not be reached for comments despite repeated attempts.

In fact, Indian Sugar Mills Association (ISMA) has long been proposing to the Centre for allowing 15-20 per cent ethanol blending in sugarcane-rich states, especially Uttar Pradesh, Maharashtra and Karnataka.

“Currently, there is a large unmet ethanol demand in India, which presents an opportunity to states like UP to divert a portion of their sugarcane and molasses towards ethanol production, which would also take care of their excess sugarcane capacity and resolve sugar storage challenges as well,” ISMA director general Abinash Verma told Business Standard.

For the targetted 10per cent blending during current ethanol season (Dec-Nov) 2018-19, the oil marketing companies (OMC) had floated tender for procuring 3,300 million litres (ML), comprising 660 ML for ethanol manufactured from B-heavy molasses/sugarcane juice/damaged food grains and 2,630 ML from C-heavy molasses.

Till July 8, ethanol supply contracts for nearly 2450 ML had been executed and 1400 MT already lifted by the OMCs. So far, UP had supplied more than a third of the total ethanol at 555 ML with other sugarcane rich states viz. Maharashtra, Karnataka, Bihar, Andhra Pradesh and Gujarat accounting for the rest.

Presently, the average ethanol blending is around 6.1 per cent, much lower than the 10 per cent target set by the Centre. Meanwhile, the drought in Maharashtra has adversely affected ethanol production in Maharashtra with the local administration directing mills against ethanol manufacturing owing to water shortage.

“Over the past 12 months, fresh ethanol capacity has come up in North India, especially UP. Since the state is not likely to face any sugarcane shortage in the coming season, it would be commercially viable for the state mills to be allowed to produce more ethanol for blending in petrol in the state,” he added.

UP scores the highest ethanol blending ratio in India at 9.8 per cent due to robust cane availability and ethanol capacity.

Public sector behemoth Indian Oil Corporation’s (IOC) is setting up an ethanol plant in Gorakhpur, the pocket borough of state chief minister Yogi Adityanath. The project spanning 50 acres would cost Rs 800 crore.

IOC is the top buyer of ethanol with about 45 per cent share, followed by Hindustan Petroleum (HP) and Bharat Petroleum (BP).