Mumbai has officially advanced its target for blending 20pc ethanol in gasoline (E20) nationwide to 2025 and published a roadmap for achieving the new mandate.
Prime minister Narendra Modi announced the earlier target during a biofuels-themed webcast to mark World Environment Day on 5 June. The target replaces a previous 2030 deadline for achieving E20, first set in the country's national biofuels policy in 2018.
Modi also released a "Roadmap for ethanol blending in India 2020-2025" at the event, which recommends E10 be made available nationwide by April 2022 until 2025, alongside a phased E20 rollout across the country from April 2023 starting in states with surplus ethanol production. Oil firms have earmarked 11 states including Uttar Pradesh, Haryana, Delhi, Goa, Karnataka, Maharashtra and Punjab where E20 will be launched in selected cities by April 2023.
Ethanol supply should reach 10.16bn litres for nationwide E20 in the December 2025-November 2026 supply year according to the report, though the actual volume needed may be lower depending on the penetration of electric vehicles by that year. The roadmap sees the central government's existing loan assistance scheme driving adequate growth in output capacity over the next five years, and expects a 78pc rise in molasses-based and 187pc hike in grain-based distillery capacity by 2025, to 7.6bn l and 7.4bn l respectively. "Special efforts" will be needed to attract investment in grain-based distilleries in India's northeast which lacks a sugarcane industry.
The report suggests a five-year ex-mill price floor for ethanol replace the current annual pricing cycle to give assurance to investors, with favourable ex-mill prices for non-sugarcane feedstocks to promote water savings. Cumbersome environmental clearance processes should be streamlined for new and expanding distilleries, with regulatory hurdles removed for smaller projects and those with zero liquid discharge.
To smooth supply and demand imbalances between regions, 15 of 29 state governments yet to do so should remove regulations blocking inter-state transport of the fuel, and oil companies should increase existing tankage facilities by half to reach 446.4mn l nationwide.
Flex fuel and vehicles compatible with higher blends should be launched and incentivised, with a rollout of E10 engine tuned vehicles from April 2023 and E20 from 2025 suggested in the roadmap. Tax breaks should ensure ethanol remains price competitive against gasoline at the pump even if petroleum costs drop from recent highs.
The roadmap has garnered mixed responses from producers: some have lauded the initiative as providing clear direction to encourage investment, while others point to the many obstacles on the road to nationwide E20.
Capacity addition forecasts may be overblown, as despite government loan aid and a tripartite mechanism with banks, most proposed projects are still refused loans due to poor financials. Only around 40pc of 606 molasses-based and 418 grain-based distilleries approved in-principle since 2018 are likely to materialise according to a leading consultant.
Favourable monsoons for the past few years have boosted sugar, grain and rice output to surplus levels, but a downturn in weather conditions may limit feedstock availability in future years. And some producers have concerns a change in government at the next general election pegged for 2024 may reverse recent pro-ethanol policies, leaving any new distillery investments stranded.
The current leadership frames biofuel blending as crucial to reducing fuel import dependence and drawing down its sugar glut while satisfying farmers. Achieving E20 could shave $4bn/yr off India's petroleum import bill, according to the roadmap. India's net petroleum receipts totalled 185mn t and cost $55bn during April 2020-March 2021, according to government data.
