Context

• Government approved amendments to the National Policy on Biofuels, 2018, to advance the date of 20% ethanol blending with gasoline to 2025-26 from 2030.
• The policy of introducing 20% ethanol is expected to take effect from April 1, 2023.
• The proposed amendments are in line with vision of India becoming energy independent by 2047.
• Given the skyrocketing fuel prices, the blending programme has a dual purpose i.e., to reduce the crude oil import bill and to allow consumers access to environment friendly fuel.

Proposed amendments to the National Policy on Biofuels

• Revised target: The main amendment is for advancing the target of blending 20% ethanol in petrol (20% ethanol, 80% petrol), by 5 years to 2025-26 from 2030.
• Additional Feedstock: More feedstocks have been allowed for the production of biofuels which can be doped with autofuels.
• Indigenous production: It also provides for promoting the production of biofuels in the country, under Make in India programme, by units located in SEZ/ Export Oriented Units (EoUs).
• Indigenous technology: The new policy signifies the development of indigenous technologies for ethanol production.
• Exports: The amendment also allows granting of permission for export of biofuels in specific cases.
• Composition: The government has allowed the addition of new members to the National Biofuel Coordination Committee (NBCC).
• NBCC was constituted under the Chairmanship of Minister, Petroleum & Natural Gas (P&NG) to provide overall coordination, effective end-to-end implementation and monitoring of biofuel programme.

National Policy on Biofuels, 2018

• It provided an indicative target of blending 20% ethanol in petrol and 5% biodiesel in diesel by 2030.
• The Policy categorises biofuels as follows:
  • Basic Biofuels First Generation (1G) bioethanol & biodiesel and "Advanced Biofuels".
  • Advance Biofules Second Generation (2G) ethanol from non-food crops, Municipal Solid Waste (MSW) to drop-in fuels.
  • Algae based Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
  • 4G biofuels yet not classified will be from genetically engineered crops
• It expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
• The Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
• With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of 5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
• The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, short gestation crops.

History of ethanol blending in India

• Since 2001, India has tested the feasibility of ethanol­blended petrol whereby 5% ethanol blended petrol (95% petrol­5% ethanol) was supplied to retail outlets.
• In 2002, India launched the Ethanol Blended Petrol (EBP) Programme and began selling 5% ethanol blended petrol. However until 2013­-14, the percentage of blending never crossed 1.5%.
• Standards for E20, E85 and even E100 fuel have also already been laid.
• Since 2020, India has been announcing its intent to achieve 10% blending by the end of 2022 and 20% blending by 2030.
• Currently, about 10% of ethanol is blended in petrol.

Global Production of Ethanol

• The global production of fuel ethanol touched 110 billion litres in 2019, or about an average growth of 4% year on year during the last decade.
• U.S. and Brazil make up 92 billion litres, or 84% of the global share, followed by European Union (EU), China, India, Canada and Thailand.

India’s ethanol production estimates

• To achieve 20% ethanol blending, pan-India ethanol production capacity will have to increase from current 700 to almost 1500 crore litres annually.
• NITI Aayog has estimated an ethanol demand of 10.16 billion litres by 2025, based on the expected growth of vehicles.
• India’s current ethanol production capacity consists of 426 crore litres from molasses­ based distilleries, and 258 crore litres from grain­ based This is expected to increase to 760 crore litres and 740 crore litres respectively according to NITI Aayog.
• Moreover, this will require six million tonnes of sugar and 16.5 million tonnes of grains per annum in Ethanol Supply Year (ESY) 2025.
• The increased thrust upon electric vehicles could offset the ethanol demand from 1,016 crore litres to 722-­921 crore litres by 2025.

Potential gains of ethanol blended petrol

• Reduce reliability on crude oil: Ethanol can be sourced from sugarcane, molasses, maize, which given India’s agricultural base, can substantially reduce India’s dependence on petroleum.
• Cut import bill: India’s net import of petroleum was 185 million tons at a cost of $55 billion in 2020­-21. According to NITI Aayog roadmap for ethanol blending, a successful 20% ethanol blending programme could save the country $4 billion per annum
• Save cost: The government expects to save $6.45 billion in this fiscal year alone (FY23) from ethanol blending.
• Self-sustainability: India being world’s third biggest oil importer and consumer relies on foreign suppliers for about 85% of its fuel demand. Thus, indigenous ethanol blending is pertinent for sustainable development towards Atamnirbhar Bharat.
• Decreased emissions: The roadmap estimated higher reductions in carbon monoxide emissions with E20 fuel i.e., 50 per cent lower in two-wheelers and 30 per cent lower in four-wheelers as compared to unblended petrol.

Challenges concerning ethanol blended petrol

• Less efficacy: It takes much more ethanol to power a vehicle’s engine than petrol. When using E20, there is an estimated loss of 6­7% fuel efficiency for four wheelers, 3­4% for two wheelers which are originally designed for E0 and calibrated for E10 and 1­2% for four wheelers designed for E10 and calibrated for E20.
• Engine retrofitting: Vehicles made in India since 2008 are material-compatible (rubber and plastic components) with E10 (10 per cent ethanol blended in petrol) and fuel-efficient compliant with E5 (5 per cent ethanol blended in petrol), but their engines are not tuned to E10 for optimum performance. At the next stage, when E10 petrol is made available across the country, new vehicles will need engine modifications.
• Increased vehicle cost: The two­ wheeled flex fuel vehicles would be costlier by ₹5,000 to ₹12,000 compared to regular petrol vehicles.
• A flexible-fuel vehicle (FFV) is an alternative fuel vehicle with an internal combustion engine designed to run on more than one fuel and both fuels are stored in the same common tank.
• Limited supply: The current capacity derived from sugar molasses barely comprises 8 to 9% and is concentrated largely in 3 states - UP, Maharashtra and Karnataka. These are termed as surplus states due to their production in excess of the 10% blending requirement. All other states are deficit.
• Environmental costs:, There is no evidence of reduction in nitrous oxides due to EBP adoption.
• By-Products: Ethanol also leaves residual by­products that can corrode and damage the vehicle which is why, while vehicles can be run on ethanol, they need to be tuned accordingly.
• Land usuage: A report by the Institute for Energy Economics and Financial Analysis (IEEFA) says that for India to meet its target of 20% ethanol blended in petrol by the year 2025, it will need to bring in 30,000 additional sq km of land to come under maize cultivation.
  • IEEFA contends that half that land can be used more efficiently to produce clean electricity from solar energy and generate renewable energy for Electric Vehicles (EV).
  • For example, an EV charged from solar energy generated on one hectare of land can drive 32 times further than a vehicle running on ethanol derived from one hectare of sugarcane.
• Food insecurity: IEEFA noted that rising manufacturing of food-based raw material for ethanol production could impact food security when India ranks 101 out of 116 nations on the World Hunger Index 2021.
• Water stress: For India, sugarcane is the cheapest source of ethanol. On average, a ton of sugarcane can produce 100 kg of sugar and 70 litres of ethanol but that would mean 1,600 to 2,000 litres of water to produce 1 kg of sugar, implying that a litre of ethanol from sugar requires about 2,860 litres of water, creating water scarcity situation.
• Minimum Support Price: The prices of ethanol produced in India are higher compared to U.S. and Brazil, since the cost of raw materials i.e., sugarcane and food grains are fixed by the government to support farmers, thus limiting EBP adpotion.
• Fund crunch: Many cooperative sugar mills have complained about a fund crunch in operations. Banks are reluctant to finance sugar mills given their weak balance-sheets.

Related Schemes 

• E-100 Project: It proposes to set up a network for production and distribution of ethanol in India.
• Pradhan Mantri JI-VAN Yojana, 2019: To create an ecosystem for setting up commercial projects and to boost Research and Development in 2G Ethanol sector.
• GOBAR (Galvanizing Organic Bio-Agro Resources) DHAN scheme: It focuses on managing and converting cattle dung and solid waste in farms to useful compost, biogas and bio-CNG, thus keeping villages clean and increasing the income of rural households.
• Repurpose Used Cooking Oil (RUCO): It was launched by Food Safety and Standards Authority of India (FSSAI) and aims for an ecosystem that will enable the collection and conversion of used cooking oil to biodiesel

Way Forward

NITI Aayog has also suggested the following to promote ethanol:

• Create a “Clean Air Impact Fund” to provide viability gap funding (VGF) for projects with long gestation periods and low returns on investment such as bio-ethanol projects.
• Provide “priority sector” status for 2G bioethanol projects. The concept of ‘solar parks can be applied to bio-fuels; land can be leased by the government to oil marketing companies (OMCs) for energy crops.
• To compensate the consumers for a drop in efficiency from ethanol blended fuels, tax incentives on E10 and E20 fuel may be considered.
• Change in crop patterns to reduce dependence on one particular crop and to move to more environmentally sustainable crops for ethanol production.

The National Policy on Biofuels had emphasised on 2G biofuels in 2018 too, but the E20 target put the focus back on first generation feedstock options.  At the moment, 2G biofuels technology is at a nascent stage, due to which the roadmap has called for technological innovations.