Biofuels! - What's driving their growth?

What's driving the Ethanol madness? 

Twitter Handle: @shuchi_nahar

In terms of source, the Indian ethanol market has been categorized into sugar & molasses-based ethanol, second-generation (mixed grains) and grain-based ethanol. The energy demand in our country is rising due to an expanding economy, growing population, increasing urbanization, evolving lifestyles, and rising spending power. Based on application, the market has been segmented into industry solvent, fuel & fuel additive, beverages, disinfectant, personal care, and flavouring & fragrance. The target of achieving 20% Ethanol blending by 2030 has been revised to be achieved by 2025.

About 98% of the fuel requirement in the road transportation sector is currently met by fossil fuels and the remaining 2% by biofuels. Today, India imports 85% of its oil requirement. The Indian economy is expected to grow steadily despite temporary setbacks due to the COVID pandemic.

Domestic biofuels provide a strategic opportunity to the country, as they reduce the nation’s dependence on imported fossil fuels. In addition, when utilized with appropriate care, biofuels can be environmentally friendly, sustainable energy sources. They can also help generate employment, promote Make in India, Swachh Bharat, doubling of farmers’ incomes and promote Waste to Wealth generation.

This would result in a further increase of vehicular population which in turn will increase the demand for transportation fuels. Domestic biofuels provide a strategic opportunity to the country, as they reduce the nation’s dependence on imported fossil fuels. In addition, when utilized with appropriate care, biofuels can be environmentally friendly, sustainable energy sources.

Biofuel Manufacturing Process

Growth in Biofuels

The Indian government announced a multi-year plan to increase the blending of ethanol in automotive fuel. This was done with the objective of moderating imports and vehicular emissions. What made the industry sit up and take notice was that this did not merely entail an announcement of intent it was backed by growing year-on-year procurement by the country’s oil marketing companies. These oil marketing companies procured 173 crore litres of ethanol from sugar companies for onward blending during 2019-20.

Below the table provides the country-wise prices of ethanol:

The prices of ethanol produced in India are higher in comparison to global players, since the cost of raw materials viz. sugarcane and food grains are fixed by the government to support the farming community. Globally, the three major factors drive the production of ethanol and its usage in the transportation sector, namely :

1. Demand Enrichment: Governments’ mandate for blending a minimum percentage (%) of ethanol with gasoline fuel & production of ethanol compatible vehicles.

2. Supply Enrichment: Schemes for ethanol production from different feedstocks and encouragement to augment bio-refineries and their capacities.

3. Incentives: Promoting the use of higher ethanol blends through price incentives (tax relief at the retail level) and tax incentives for vehicles compatible with E20 and E85.

Fuel Ethanol Demand in India

Ethanol (also called ethyl alcohol, or alcohol) is an organic chemical compound with the chemical formula C2 H5 OH. Besides the EBP Programme, ethanol finds competitive usage in the portable sector and the chemical & pharmaceutical industry. Demand for ethanol as a fuel is primarily driven by blending mandates, the widespread availability of fuel, and compatible vehicles and fulfilment of other infrastructural requirements.

Availability of feed-stocks for production of ethanol

To produce 684 crore litres of ethanol by the sugar industry by 2025-26, sugarcane equivalent to 60 LMT of surplus sugar would be diverted to ethanol. In the current sugar season, 2020-21 more than 20 LMT of sugar is estimated to be diverted. To produce 666 crore litres of ethanol/ alcohol from food grains by 2025-26, about 165 LMT of food grains would be utilized.

 

At present damaged food grain availability is around 40 lakh ton in the country. In 2020-21 approximately 20 lakh ton maize is surplus; FCI Rice is also sufficient in stock (266 LMT) and it will continue to remain robust as procurement of paddy/rice at MSP continues at expected levels. The country is producing sufficient food grains and sugar to meet the requirement for ethanol.

Estimation of supply and capacity augmentation

During the meeting of the Committee of Secretaries on 13th November 2020, DFPD informed that the fuel 20% ethanol requirement by 2025 will be met from sugar as well as grains sectors. The chart below provides the Year-wise and Sector-wise Ethanol Production Projections as per increasing Blending Percentages.

The grains and molasses-based ethanol production capacity necessary to meet the production projections.

The central government is expecting investments of up to Rs 41,000 crore to help India achieve its ethanol blending target of 10% by 2022 and 20% by 2025. This investment is likely to arrive as capacity addition for ethanol-producing distilleries in addition to building new ones.

 

With a view to achieve blending targets, DFPD is making concerted efforts to enhance the ethanol distillation capacity in the country. For this, the government had invited applications from the entrepreneurs under the ethanol interest subvention schemes in September 2020 during a window of 30 days. Thus far, 238 projects for a capacity enhancement of 583 Cr litres with a loan amount of about Rs.16,000/- crore have been approved by DFPD. It is expected that at least 400 Cr litres capacity would be added to these projects by 2024.

There is an estimate that an ethanol demand of 1016 cr. litres based on expected growth in vehicle population. Modelling exercise on expected penetration of electric vehicles estimate the ethanol demand for petrol blending in the range of 722-921 crore litres in 2025. Prime Minister mentioned, 5,000 compressed biogas plants will be set up by 2024 with a production target of 15 million tonnes. 

Ethanol demand, market outlook: https://myweekendspot.blogspot.com/2021/05/ethanol-demand-market-size.html

Enzyme Biotechnology: https://myweekendspot.blogspot.com/2020/12/what-are-enzyme-biotechnology-market.html

India towards Biobased economy: https://myweekendspot.blogspot.com/2021/05/biotechnology-way-towards-bio-based.html

Biotechnology Industry Overview: https://myweekendspot.blogspot.com/2021/05/indias-biotechnology-industry-size.html

Sources & Credits: 

- NITI Aayog

- iied

- Company reports

- Business Standards

- Bloomberg Quint

-aimspress

-chemanalyst

Twitter Handle: @shuchi_nahar

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