Ethanol - Demand, Production, Opportunities & Production Projections (Part-2)

Rapid Increase in Ethanol Production Capacity

Twitter Handle: @shuchi_nahar

Two Different types of processes  to produce Ethanol

To produce 684 crore liters 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 liters 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 tons 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.

Molasses-based distilleries have also been offered interest subvention to convert them to dual feed, to convert both food grains & molasses into ethanol. Thus, it is expected that there would be sufficient ethanol distillation capacity to achieve blending targets. DFPD is effectively monitoring the situation and encouraging states and investors to set up new industries and make sufficient availability of ethanol for blending.

Under the PM-JIVAN scheme, 12 commercial plants and 10 demonstration plants of Second Generation (2G) Bio-Refineries (using lignocellulosic biomass as feedstock) are planned to be set up in areas having sufficient availability of biomass so that ethanol is available for blending throughout the country. Already Rs. 1969.50 Crores have been earmarked for this scheme. These plants can use feedstocks such as rice straw, wheat straw, corn cobs, corn stover, bagasse, bamboo and woody biomass, etc.

In the year 2017-18, the installed capacity of molasses-based distilleries was around 278 crore liters. To enhance ethanol production capacity in the country, the government in July 2018 & March 2019 notified two interest subvention schemes for molasses-based distilleries. Under the aforesaid scheme of DFPD, interest subvention at the rate of 6% per annum or 50% of the rate of interest charged, whichever is lower on the loan sanctioned was borne by the central government for 5 years.

DFPD approved 368 projects for setting up of new distilleries/expansion of existing distilleries. Loans amounting to about Rs.3600 crore have been sanctioned by banks to 70 sugar mills so far; 31 projects have been completed creating a capacity of 102 crore liters as a result. The capacity of molasses-based distilleries has reached 426 crore liters. 39 more projects with a capacity of 93 crore liters are likely to be completed by March 2022 which will bring cumulative capacities to about 519 crore liters.

Intending 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 liters with a loan amount of about Rs.16,000/- crore have been approved by DFPD. It is expected that at least 400 Cr liters capacity would be added to these projects by 2024.

An Integrated Bio-Refinery Model

The concept of an integrated Bio-Refinery model or Bio-park is being envisioned which will encompass the integration of the following facilities:

1. 2G Ethanol plant: Second Generation or 2G ethanol plant can convert agricultural residues like rice straw, wheat straw, energy crops, etc. to ethanol. With around 160MMT of surplus agricultural residues generated in India annually, 2G ethanol plants offer significant opportunities in India. A 100 km per day plant can utilize 2 lakh tonne per annum of agricultural residue to generate around 3 crore liters of ethanol per annum.

2. Grain-based 1G Ethanol Plant - Grain-based First Generation or 1G Ethanol Plant can convert the starch present in grains like rice, corn, etc. to ethanol. Some by-products like CO2 & Dried Distillers Grains with Solubles (DDGS) are also generated which can generate additional revenue. A 100 km per day 1G plant is estimated to incur capital expenditure of around `170 to 200 crores with a land requirement of approximately 20 acres.

3. CBG Plant - Compressed Bio Gas (CBG) or Bio-CNG can be produced from agricultural residue, Municipal Solid Waste (MSW), cow dung, etc. CBG can easily replace CNG. The bio-manure produced in the plant is an additional source of revenue. The estimated capital expenditure for a 15 tonne per day CBG plant is around Rs.60-100 crores, depending on the feedstock and the land requirement of approx. 15 acres.

4. Production of Chemicals - Production of bio-chemicals in the Bio-refinery will improve its economics significantly. Some technologies for the production of biochemicals are ready for commercialization while many are still in the development stage.

5. Cogeneration Plant - Setting up of a Cogen plant by using Lignin (generated in 2G plant) & Biogas (CBG plant) can ensure continuous & reliable power supply to the Bio-Refinery. Some of the advantages of Integration of various plants in a Bio-Refinery are - 

Improved economics with reduced cost of feedstock and sustenance of biomass supply-chain on a long-term basis. With the setting up of 1G, 2G, and CBG plants in the same premises, there can be a common source/agreement for the supply of grains (for 1G Ethanol Plant) and supply of waste straw/agricultural residue generated (feedstock for 2G/CBG Plants). 

Optimization of common resources like Utilities (Cooling tower, Boiler, ETP, etc.) & Offsite facilities (tankages, loading Gantry, firefighting system, etc.) can reduce capital expenditure.

Integration of 1G ethanol and CBG plants with established & proven technologies can bring in economic viability & sustainability of the Bio-Refinery since 2G ethanol technologies are still in the maturing stage. Optimization of Equipment Spares & Manpower required for Operation / Maintenance of the plants.

The Future Landscape of Opportunities

Ethanol Industry is expected to grow by 500% By 2025, at a 20% blending level, ethanol demand will increase to 1016 Crore liters. Therefore, the worth of the ethanol industry will jump by over 500% from around 9,000 Crore to over 50,000 Crore.

Ethanol distillation capacity to grow by more than three times to 1,500 Crore liter annually Financial assistance scheme introduced by DFPD during 2018-2021 to increase ethanol production capacity.

895 proposals with a loan amount of 70,419 Crore. Estimated 165 LMT of surplus grain to be utilized annually from 2025 to produce ethanol which would result in 30,000 crore payments to farmers.

Launch of new vehicles compatible to run on E20 fuel from 2023 and flex-fuel vehicles from 2024. This will attract new investment and create employment opportunities.

Year-wise & Sector-wise Ethanol Production Projections 

The shortfall incapacity in any year can be compensated as sugar mills are also using sugar-rich feedstocks like B heavy molasses/sugar syrup which produces 20% more ethanol of rated capacity. Now many mills have started using these feedstocks in place of C heavy molasses.

Sources & Credits - NITI Aayog Research Report

Ministry of Petroleum and Natural Gas

Part 1 Ethanol Blog: https://myweekendspot.blogspot.com/2021/05/ethanol-demand-market-size.html

Ethanol-based company analysis Praj Industries: - https://myweekendspot.blogspot.com/2021/01/praj-industries-apis-fermentation.html

Twitter Handle: @shuchi_nahar

Disclaimer: The information provided on Shuchi Nahar’s Weekend Blog is for educational purposes only. The articles may contain external links, references, and a compilation of various publicly available articles. We are not SEBI Registered so please consult your Investment Advisor before taking any actions. Hence all the authors are given due credit for the same. All copyrights and trademarks of images belong to their respective owners and are used for Fair Educational Purpose only.