Wednesday, September 5, 2007

[PBN] India introduces mandatory ethanol blending


Ethanol blended petrol likely from October

New Delhi, Sept. 3 (PTI): Come October, your car may run on petrol mixed
with five per cent ethanol as the government is likely to make the
blending mandatory.

A Group of Ministers on sugar has recommended to make five per cent
blending of ethanol in petrol mandatory from next sugar season, starting
October 2007.

"The GoM has recommended compulsory blending of petrol with five per
cent ethanol, while 10 per cent will be optional, from the next month,"
a senior government official said.

The move would enable the use of more sugarcane for the manufacturing of
ethanol, while also helping sugar industry that is presently crippled
with over production.

The recommendations are for the entire country except Jammu and Kashmir,
the north-east states and island territories, the official added.

He also said the matter would be placed before the Cabinet shortly.
Currently, the government allows 5 per cent optional blending of ethanol
in petrol. At five per cent, 600 million litre ethanol is required for

The GoM has also recommended a uniform purchase price of Rs 21.50 per
litre for ethanol, the official said.

Another top food ministry official said: "GoM has agreed. But there are
lot of issues that needs to be sorted out with the state governments to
make the ethanol blending programme successful."

The optional ethanol blending, which is permitted by the government
since November 2006, is yet to take off due to difference in levies
imposed by the state governments for inter-state movement.


Mandatory 10% ethanol blending?
3 Sep, 2007, 0240 hrs IST,

Competition for ethanol could affect prices

As a principle, the decision to blend petrol with ethanol is welcome,
the ostensible reasons being its environmental friendliness and saving
on import of crude oil. A similar decision was taken a couple of years
ago for blending 5% on an optional basis and that has not yielded
desired results. Making it mandatory now only obliges oil marketing
companies to do so and not the state governments, whose lack of
enthusiasm could scuttle the proposal.

A mere decision to make it mandatory without ensuring forward and
backward linkages in the supply chain will be of little avail. BIS
specification is required to be revised. Studies are required by vehicle
manufacturers relating to startability/driveability, emissions and
engine durability. Concerns about material compatibility and ECU
calibration are to be addressed. Refinery process adjustments are also
required for blending 10% ethanol. Industry sources also point out to
the lack of severity in the distillation process in the country to
ensure fuel grade ethanol that should be100% water-free.

While most of the above are controllable factors, what could bedevil the
scheme are the non-controllable ones in the ethanol market that could
affect supplies on a sustained basis, of consistent quality and content,
throughout the country and at all times.

Frequent changes in use of petrol of blended and non-blended varieties
affect the engines. More worrisome is the competing demand for the
rectified spirit, from which ethanol is derived, for industrial alcohol
and potable liquor. Sugarcane, being an agricultural crop is subject to
vagaries of nature and with khandasri and jaggery (gur) manufacturers
competing for the same supply, could see wild price fluctuations.

Potable liquor and the ubiquitous illicit distillation, which are both
powerful lobbies in all state governments, always enjoy priority for
supplies and this could further distort the market for ethanol. It can
be used for blending as long as its price is below that of petrol. Of
course the long-term adverse impact of such a decision on agronomy, land
and water use etc., are also required to be carefully assessed. The
present decision appears to be sugar industry specific and could prove
counterproductive without a well thought out plan to meet all attendant

The concern over shortages is unfounded

A big yes. If there is a country where ethanol makes sense, it is India.
The ethanol programme is farmer-friendly and tailor-made for India given
that 72.2% of the Indian population lives in rural areas and agriculture
accounts for 20% of the country's GDP. It is also an energy security
programme — the country meets 70% of its crude oil requirements through
imports. Ethanol is also an environment-friendly fuel, as it reduces the
emission of harmful green house gases.

Critics say that the ethanol programme may be actually creating a food
shortage. But not in India. In the US ethanol is made from corn. Brazil
makes it directly from sugarcane juice. But India makes ethanol from
molasses, a by-product of sugar manufacturing. India's sugar production
was 30 million tonnes in 2006-07, as against 20 mt in 2005-06.

This has augmented the availability of molasses, enough to yield 1,100
million litres of additional alcohol, which i s sufficient for a 10%
ethanol program. Moreover, sugarcane is cultivated on 5.16 million
hectares—just 2.3% of total gross cropped area of the country.

Another fear is that of sustainability of supplies. The ethanol
programme disruption in 2004-05 is often offered as an argument. Sugar
production had fallen due to two consecutive years of poor monsoon in
Maharashtra. But that was an exception. A long-term program can't hinge
on the weather.

The concern over shortage of distillation capacity is unfounded as
capacity utilisation is only 60% for lack of demand. In UP, the largest
sugar producer, against the installed annual capacity of 1,260 million
litres production is 800 million litres.

The state already caters to the 5% ethanol programme. Once 10% ethanol
is mandated, operating distilleries may enhance output and those shut
may restart. Besides, there will also be supplies from distilleries
coming up in the new integrated sugar complexes. Twenty four new
distilleries have got environmental clearance. This means 435 million
litres of additional alcohol. The energy argument does not hold. Energy
from bagasse exceeds the energy required to produce sugar and alcohol by
0.25 GCal per tonne of sugarcane crushed. In balance, the ethanol
programme will do a world of good to India.

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