India's ethanol makers to receive boost from mandatory fuel blending

A government initiative to promote blending ethanol with petrol to reduce India’s dependence on hydrocarbons is getting a slow start though implementation is just months away.
Ethanol producers are preparing to take advantage of the requirement that oil companies must sell petrol blended with 5% ethanol across the country starting July 1, 2013. A January update said that by 2017, every liter of petrol should be blended with 20% ethanol.
Such a practice is followed in several parts of the world, most notably in the U.S. and Brazil, where the product is known as gasohol and usually contains 10% ethanol. The Indian government initiatives are part of the national biofuel policy announced in December 2009.
While some companies are planning investments for capacity expansion and new plants to cater to the new requirement, others are looking at focusing on research and development to tap alternative methods for ethanol production.
Institutions such as the Central Salt and Marine Chemicals Research Institute in Bhavnagar, the International Crop Research Institute for the Semi-Arid Tropics in Hyderabad, and Central Leather Research Institute in Chennai are researching alternative ways of producing ethanol and biodiesel.
In addition, Pune-based Praj Industries Ltd., which installs biofuel plants and distilleries, plans to set up India’s first plant to make new-generation ethanol produced directly from agro-waste. It marks a shift from the traditional molasses-based extraction, Chairman Pramod Chaudhari said.
“We will be setting up the country’s first 30,000 liters per day demonstration plant in southern Maharashtra with an investment of at least Rs125 crore (US$22.5 million) for one of our clients,” said Chaudhari, adding that the new technology is for producing ethanol directly from agricultural waste such as stover, cobs, trash, husks and bagasse.
He said the existing ethanol production capacity in the country is adequate to meet the currently mandated 5% ethanol blending with petrol. “The new investments are mainly driven by the hope that the blending ratio will be raised to 20% by 2017 as indicated by the government,” he said.
Across the world, there are only three factories that produce ethanol from agricultural waste. The first two commercial plants were set up in the U.S.; the third has been commissioned in Europe, but has yet to start production.
Praj hopes to start commercial production in a year’s time, according to Chaudhari, who said he plans to bring in a “strategic investor” for the project.
Currently in India, ethanol is mostly produced from molasses, a by-product of sugar manufacturing. According to data from the Ethanol Manufacturers Association of India, the current capacity of the country is around 1.74 billion liters.
Overall, blending petrol with ethanol makes sense, given that India imports more than 70% of its crude oil requirements.
The ex-refinery price of petrol is around Rs35 (US$0.63) per liter for oil companies. By blending ethanol, the oil marketers will not save anything in terms of cost as the price of ethanol across the country varies between Rs32 (US$0.58) and Rs43 (US$ 0.77) per liter, but they will be able to make costs balance as crude will not have to be imported.
State ethanol manufacturers are demanding a purchase price of Rs40 (US$0.72)per liter of ethanol. However, oil manufacturing companies have not agreed to pay the price, Vijaysinh Mohite-Patil, chairman of the Ethanol Manufacturers’ Association of India, said.
There are some additional hurdles to be cleared. Experts and some ethanol makers are skeptical about the implementation plan itself.
“Before deciding to make investments for creating additional capacities, we would like the policy of 5% blending implemented by oil marketing companies and the central government,” said R.G. Mane, secretary, All India Ethanol Manufacturing Association.
Pointing out that although oil marketing companies have floated a tender for 1.4 billion liters of ethanol for fiscal 2014, manufacturers have committed the supply of just around 560 million liters, “due to haphazard policies of government on this issue.”
The Ethanol Manufacturers’ Association, which represents distilleries in the state, has decided to approach the Union government once again with its long-pending demands concerning ethanol blending with petrol.
(April 29, 2013)