Revving up on ethanol

In the National Policy on Biofuels announced in 2008, the Government of India mandated phased implementation of a programme of ethanol blending with petrol. Lack of resolve on the part of the government to enforce the decision that it has since announced over and over again is the only reason that can be cited for the inertia on this front. Last heard, the government had postponed the deadline for the nationwide roll-out from December 1, 2012 to June 1, 2013. The government having cleared the import of the commodity, the public sector oil marketing companies were reported to be moving jointly to float a Rs. 3,500-crore global tender to source ethanol. The annual requirement is estimated to be about 1,000 million litres for a pan-India roll-out of 5 per cent blended petrol, which is already available in some States. While getting started at 5 per cent has been such a slog for India, countries like the United States now have established ‘doping’ programmes that involve up to 20 per cent ethanol.

India stands to save a huge amount of foreign exchange through the blending programme, provided it gets ethanol at a viable price. There is also an environment dividend. Unlike in the case of ethanol derived from food crops such as corn, which could have an adverse impact on prices, as it happens in the U.S., India’s ethanol source is sugarcane. It ought to follow the example of Brazil, 51 per cent of whose fuel market is made up by sugar-based ethanol, making it the leading biofuel exporter and the second biggest producer after the U.S. Ethanol production in India was expected to rise by 29 per cent to 2.1 billion litres in 2012 in a year of high sugar production, therefore higher production of molasses, from which ethanol is made. Domestic ethanol consumption rose by 4.5 per cent to 2.08 billion litres. However, only an estimated 400 million litres were available to be blended with petrol. The liquor industry’s insatiable appetite for ethanol is responsible, and powerful interests that push for better price yields are having a field day. Even as ethanol imports at reasonable prices are allowed to balance demand and supply and stabilise prices, the OMCs and ethanol producers should reach a consensus on a pricing formula that is mutually beneficial in the long term. If this does not happen, the government ought to consider an intervention to mandatorily channel a certain percentage of indigenously produced ethanol for a requirement that is clearly in the national interest. States should also cooperate by easing regulations. Meanwhile, sufficient lead time should be given to the auto industry to carry out engine and other modifications to make vehicles compatible with still higher levels of blended fuel.