News
01/04/26
Indian ethanol producers call for government support
Mumbai, 1 April (Argus) — Ethanol producers in India are urging the government
to support the sector as lower demand and tight margins persist, particularly as
global crude oil uncertainty creates an opportunity to prioritise sustainable
fuels. The ethanol industry is calling for the diversification of ethanol usage,
increases in blending mandates, and higher prices. The war in the Mideast Gulf
has been a "wake up call," director of Shree Renuka Sugars, Atul Chaturvedi told
Argus on 26 March. The government should use domestically produced ethanol
wherever possible to ensure steady demand, he said. Chaturvedi particularly
stressed considering ethanol for industrial use, including using ethanol burners
for domestic and industrial cooking applications. Unlike for gasoline blending
requirements, India does allow ethanol imports for non-blending purposes.
India's ethanol production capacity has exceeded its fuel-blending requirements,
creating a structural surplus which could be directed toward industrial
applications, he added. But prices for domestic ethanol are regulated by the
government, rendering it less competitive, while imported ethanol is
consistently cheaper than its domestic counterpart. This regulation reduces the
allure of domestic ethanol to be purchased for industrial use. The average price
of domestic ethanol stands at $1,102/t according to the oil ministry's latest
data, significantly higher than Argus ' last cfr Mumbai ethanol assessment of
$770/t on 31 March. Most ethanol India imports for industrial use is from the
US, which is typically the world's lowest-cost producer. Domestic fuel ethanol
industry also faces pricing challenges Adding to a structural surplus, Indian
ethanol producers are grappling with squeezed margins as costs have been rising,
while ethanol sales prices remain capped. Sugar prices rose sharply in March
after shipping disruptions at the strait of Hormuz pushed crude prices higher.
Elevated crude prices typically push sugar mills to boost ethanol production and
limit sugar output. But this price lift did not extend to sugarcane based
ethanol in India, where prices are fixed through government tenders. Producers
sell ethanol to oil marketing companies (OMCs) for gasoline blending at fixed
prices even when production costs increase, creating a significant opportunity
cost compared with selling sugar. The sugar industry has been asking the
government to price ethanol from different feedstocks at parity for a long time,
Chaturvedi said. The sugarcane-based ethanol prices should align with the fair
and remunerative price at which maize ethanol is produced, he said. Grain-based
distilleries benefit from lower raw material costs, making maize-based ethanol
comparatively more advantageous under current conditions. The government price
of C-heavy molasses-based ethanol, which is derived from sugarcane, is 57.97
rupee/litre ($895/t). Maize-based ethanol is priced at Rs71.86/litre ($1,110/t).
Corn accounts for 31pc of ethanol feedstock, with sugar contributing 49pc and
the rest coming from surplus rice and damaged foodgrain. Prices of ethanol from
maize command a premium over sugarcane-derived grades, further destabilising the
sector and reducing purchases from sugar mills that use molasses. India's
accumulating unused ethanol stocks pose an economic challenge as the country's
production capacity grows, Indian Federation of Green Energy (IFGE) Sugar
Bioenergy Forum co-chairman Dilip Patil told to Argus . Without government
involvement, ethanol plants become financially unviable. Infrastructural
challenges and the lack of flex-fuel vehicle promotion are hindering the
expansion of higher blending mandates such as E30, despite ongoing government
discussions. Flex-fuel vehicles can run on a variety of ethanol-gasoline blends,
typically ranging from E20 to E100. India's ethanol lobby has been urging the
government to promote fuel flex vehicles even before the current conflict. Using
ethanol for diesel blending could be another solution to manage the surplus,
Chaturvedi added. This mirrors a recommendation from the All-India Distillers
Association (AIDA) to the government last month for diesel blend to cut down
fuel imports. International and domestic trials have already shown that low
volumes of ethanol can be blended into diesel without major engine
modifications, AIDA said. By Nikhil Sharma Send comments and request more
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