India’s average blending of ethanol inpetrolis expected to reach a record-high of 5.8 per cent in 2019, as a result of a surplus sugar season and stronger incentives to convert excess sugar to ethanol, United States Department of Agriculture’s Foreign Agriculture Service said in a recent report.
The report titled India Biofuels Annual 2019 added that biodiesel blending in diesel will remain muted at 0.14 per cent due to limited supply, insufficient feedstock, supply-chain constraints and restriction on imports.
“A surplus sugar season coupled with a stronger financial incentive to convert excess sugar to ethanol should help theoil marketing companies(OMCs) procure upwards of 2.4 billion litres in 2019. As a result, India will be able to achieve its highest fuel ethanol market penetration at 5.8 per cent, compared to last year’s record of 4.1 per cent,” the USDA report said.
It further added that in theory, all ethanol available in 2019, if used completely forEthanol Blending Programme, would meet a 6.6 per cent blend rate.
India’s National Biofuel Policy 2018 has stipulated an ethanol blending target of 10 per cent by 2022 and 20 per cent by 2030, while biodiesel blending target has been set at 5 per cent by 2030.
According to the report, ethanol consumption for fuel and non-fuel use will outgrow production for the fifth consecutive year, more so in 2019 due to the upsurge in demand of fuel ethanol for blending with petrol.
In 2019, supply to industrial and potable sectors will be limited by higher prices, which would lead to more demand being met by imports as compared to the previous year.
India’s total ethanol consumption in 2019 is predicted to rise 22 per cent to a record 3.8 billion litres, as compared to 3.1 billion litres consumed a year ago.
Also, ethanol production is expected to reach 3 billion liters in 2019, 11 per cent higher as compared to 2.7 billion litre produced in 2018.
According to the report, India’s five-year average ethanol consumption growth of 14 per cent, has been outperforming the country’s five-year average production growth of 8 per cent.
“Both have risen, but in response to different drivers: The rise in fuel prices coupled with very attractive purchase price of ethanol is driving ethanol consumption; consecutive year bumper harvests is supporting production growth,” the report read.
The report highlights that the US will continue to be the largest ethanol supplier and India’s ethanol imports from the country are likely to grow upwards of 750 million liters (mostly denatured), the highest recorded in a decade.
In spite of a steady increase in ethanol production, India remains a net importer of ethanol (for all end uses). Moreover, for the sixth consecutive year US will remain the single-largest ethanol supplier to India.
The Directorate General of Foreign Trade (DGFT), the government body responsible for regulation and promotion of foreign trade, last month declared biofuel as a restricted commodity, the import of which would require a license from DGFT.
According to the report, import license requirement for importing ethanol (for non-fuel use) is most likely to delay imports, if not stop them altogether. Moreover, a few bulk importers may use current stocks and are likely to make fresh purchase agreements to cover for the lapse or procedural delay in the coming months since local demand is strong.
India has about 330 distilleries, which can produce over 4.8 billion litres of rectified spirits (alcohol) per year. Of this total, about 166 distilleries have the capacity to distil 2.6 billion litres of ethanol (denatured and undenatured) to be used in fuel, industrial chemicals, and beverages.
According to oil ministry’s latest monthly report, OMCs have floated a tender for 329 crore litres of ethanol of supply year 2018-2019. OMCs have allocated 269 crore litres against the offers received. They have received close to 150 crore litre of ethanol up to 29 July 2019.
The government has in the past few years has come up with various policy initiatives in order to incentivise production of ethanol through various sources.
The Cabinet Committee on Economic Affairs (CCEA) in February 2019 approved ‘Pradhan Mantri JI-VAN Yojana’ for providing financial support to integrated bioethanol projects using lignocellulosic biomass and other renewable feedstock.
Under the scheme; 12 commercial scale and 10 demonstration-scale second generation (2G) ethanol projects will be provided a viability gap funding (VGF) support in two phases, with a total financial outlay of Rs 1,969.5 crore for the period from 2018-19 to 2023-24.
Moreover, CCEA in March 2019 approved funds amounting to Rs 2,790 crore towards interest subvention for extending loan amount of Rs 12,900 crore by banks to the sugar mills under ‘Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity’ for 268 applications, in addition to Rs 1,332 crore already approved by CCEA in June 2018.
Also, the government which has started administering the price of ethanol, has set an ex-mill price of ethanol derived out of C-heavy molasses to Rs 43.70 per litre, for the ethanol supply period between 1 December 2018 to 30 November 2019, as compared to a price of Rs 40.85 per litre in the corresponding period a year ago.
OMCs under the National Biofuel Policy 2018 have agreed to sign ethanol purchase agreements (EPAs) with 2G ethanol suppliers for a period of 15 years to provide a secure market to private stakeholders and support 2G ethanol initiatives.
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