Ethanol Blending Policy a Boon for farmers
Source : PIB
GS II : Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
GS III : Food processing and related industries in India- scope and significance, location, upstream and downstream requirements, supply chain management

Why in News ?

To increase production of fuel grade ethanol and to achieve blending targets the Govt of India has allowed use of maize and rice with FCI for production of ethanol.

What is Ethanol-blended petrol?

Ethanol : It is the organic compound Ethyl Alcohol which is produced from biomass having higher octane number than gasoline hence improves the petrol octane number. Ethanol has insignificant amount of water in it.

• Ethanol blending is the mixing of ethanol with gasoline to form different blends thus forming the Ethanol blended petrol.
• Ethanol molecule contains oxygen which allows makes the engine for more complete combust of the fuel.
  • Resulting in fewer emissions.
  • Reduces the occurrence of environmental pollution.
• Besides ethanol is also considered as renewable fuel as ethanol is produced from plants that harness the power of the sun.

Key Facts

• Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2025.
• With the vision to
  • Boost agricultural economy
  • To reduce dependence on imported fossil fuel
  • To save foreign exchange on account of crude oil import bill
  • To reduce the air pollution
• With a view to support sugar sector and in the interest of sugarcane farmers the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar.
  • Also encouraging sugar mills to divert excess sugarcane to ethanol.
• By 2025 it is targeted to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve liquidity of mills thereby help in timely payment of cane dues of farmers.
  • In past 3 sugar seasons about Rs. 22,000 cr revenue was generated by sugar mills/ distilleries from sale of ethanol to OMCs.
• To increase production of fuel grade ethanol and to achieve blending targets, the Govt of India has allowed use of maize and rice with FCI for production of ethanol.
• The extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers
  • This will also increase the income of crores of farmers across the country.
• In current ethanol supply year (ESY) 2020-21 (December to November) to achieve 8.5% blending target about 325 Cr ltrs ethanol is required to be supplied to OMCs.
• Other measures taken
  • With a view to increase existing capacities further DFPD has notified modified interest subvention scheme in January.
    • For setting up new grain based distilleries/ expansion of existing grain based distilleries, dual feed distilleries & molasses based distilleries to produce ethanol & production of ethanol from other 1G feed stocks.
    • 422 proposals with a capacity of 1684 cr ltrs for a loan amount Rs. 42000 crore have been approved by DFPD.
    • It is expected that from the proposals approved more than 600 cr ltrs may come up in next 2 to 4 years.
    • Thus, the ethanol distillation capacity from these projects and ongoing projects may reach to 1500 cr ltrs by 2024-25 which would be sufficient to achieve 20% blending target.

Ethanol blending in India has reached more than 7.2 per cent the first time. Achieved this level in the first four months of the ethanol supply year 2020-21 (December to November) putting the country on course to meet the target of 10 per cent blending by 2022.

Ethanol Blending Policy

• Sugar companies are under obligation to deliver the contracted ethanol to the nearest OMC depot.
• The OMCs are supposed to pay the transportation charges.
• Issues faced by Sugar Companies due to the policy
  • OMCs do not do the full reimbursement because the base rate was fixed in October last year (before the current spurt in fuel prices) Sugar companies.
  • Sugar companies have to bear an additional burden of Rs 3-5 per litre.
  • Sometimes ethanol got transported to OMCs before the stocked quantity aren’t empty.
    • This pushed up the turnaround time of tankers containing ethanol from one-two days to 15-20 days.
• A litre of ethanol currently costs Rs. 61 that purely depends on internal fuel prices.

Achievement by The States

• In states such as Goa, Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Haryana, Punjab, Delhi, Uttarakhand, and Himachal Pradesh (and Daman and Diu, a Union Territory) 9.5-10 per cent ethanol is being blended with petrol.
• This means these states are close to the 2022 target.

National Bio-fuel Policy

• National Bio-fuel Policy has set a target to achieve
  • 10 per cent ethanol blending with petrol by the year 2020.
  • 20 per cent ethanol blending target by 2030 which has been advanced to 2025.

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