The Cabinet has once again decided that the Petroleum Ministry must ensure mandatory blending of 5 per cent ethanol with petrol. Deadline after deadline has passed since 2006 and the ambitious programme is yet to take off. A complex set of factors involving the sugar industry and the ethanol market is at play. In recent months, the oil marketing companies have been unable to contract for even half the quantity of ethanol needed for 5 per cent doping. And the quantities offered are at rates as high as Rs.41 a litre. The oil companies have until now offered Rs.21.50, although they are open to paying a little more. One of them has meanwhile planned to invest in sugar mills to ensure a captive source of ethanol. The cost of petrol is Rs.23 a litre and the blending of ethanol obtained at a price that is any higher will be uneconomical. But the sugar industry evidently finds better price yields and guaranteed demand in the beverage, industrial, and fuel sectors. There just may not be enough ethanol available in India to meet the blending requirement unless the acreage under sugarcane goes up significantly, and sugar mills are given the option to process sugarcane juice directly into ethanol instead of sugar. Both these moves will have an impact on sugar production and sugar prices. Given the rising price of sugar and the insistence by the State governments that the sugar mills meet first the demands of the beverage industry, finding enough ethanol is going to be difficult.
Sugarcane-based ethanol is indeed “the most successful alternative fuel to date.” As an excellent oxygenate and octane booster, it clearly has technical advantages. But in India, the world’s second largest producer of sugar, almost 90 per cent of ethanol comes from cane molasses, spelling dependence on a single feedstock. Sugarcane production has historically been marked by a certain cyclical volatility, with bumper years followed by years of low production. In order to reduce its dependence on oil imports, rather than setting much store by ethanol, India should look more aggressively at other options including hybrid fuels and CNG. Several countries of the world, notably Brazil — which introduced ethanol-blended petrol as early as in 1931 — have come a long way here. But India has several limitations including land availability constraints and food security concerns that may leave a limited role for the biofuel option for now. It is time the realities of the situation were factored into ethanol policy.