Approach:
- Introduction
- Mention about the state of ethanol blending in India.
- Mention perceived benefits.
- Mention pointwise what can be done to facilitate the process.
- Conclusion
Crude oil and other petroleum products constitute more than 20% of India’s annual import bill, and India is dependent for nearly 85% of consumption requirement. Since the beginning of 2022, the price of crude oil imported has risen by 50%, while the budget estimates that in FY23, more than 30% of the import bill will be towards crude & related products. So, given the low elasticity of fuel demand, there is a need to replace this dependence on imported fuel.
Ethanol blending in India: Over the last decade, ethanol-blending programme has made significant contribution in meeting this increased demand of petrol. An 8 times increase in the volume of ethanol used in blending and a milestone of 10% blend of ethanol in petrol have been achieved recently. The program started in 2003, but saw little progress for more than a decade due to limited feedstock, lack of certainty for suppliers, preference for supply to a growing beverage industry, high taxation on ethanol and uncertain price point for blending – all posed significant challenges.
The 10% target has been achieved after concerted policy action under the National Policy on Biofuels 2018. The reduction in GST on ethanol for blending from 18% to 5%, the differentiated and remunerative price regime for different feedstocks and agreements guaranteeing offtake & financing are some measures that have propelled blending. On the back of recent growth in blending shares, the goal to advance the target of 20% ethanol has been shifted from 2030 to 2026. The transition to E10 has been rapid with E5 been achieved only in 2019-20.
Benefits: a cumulative savings in imports of approx. 12.5 million tonnes of oil equivalent and resulting forex savings of Rs. 97, 500 crores by FY26. Also, lowered GHG emissions will be and particulate matter pollution are co-benefits.
What needs to be done:
- However, to realize the savings from progressing to a 20% ethanol blend, the expectations with equipment manufacturers, consumers, oil PSUs, and farmers must be set and the outstanding issues be addressed on priority. The efficiency loss with blended fuel in the existing vehicles and the potential need for increased maintenance, component replacements and financial impacts on consumers should be addressed proactively.
- The primary focus should be on limiting the overall petrol consumption by limiting the private demand for fuel. In this respect, concerted promotion of public transit and pricing the use of private vehicles can make the target of E20 lot easier to achieve without straining the supply chain.
- Actively invest in R&D and scaling up of second generation (2G) biofuels that do not use sugarcane and food-grain, but should rely on cellulosic material & surplus biomass to produce biofuels. This is because 1G biofuel generation is resource intensive, entailing huge subsidy component for both central and states.
While electric mobility will become the predominant policy prerogative for post-2030, securing our short and medium-term fuel needs & shielding consumers from the vagaries of common market are equally important. It is here that ethanol blending can give more breathing space. Further, assessing its net impact on the wider economy is necessary to meet the ambitious ethanol blending goals by 2026. This would not only advance India’s sustainability goals but also contribute towards strengthening energy security.