Flexible Fuel: Key developments in ethanol and biodiesel blending with petrol and diesel

Key developments in ethanol and biodiesel blending with petrol and diesel

The Indian government has been promoting the Ethanol Blended Petrol (EBP) programme, with the aim of enhancing energy security, reducing im­port dependency on fuel, saving foreign exchange, addressing environmental iss­ues and providing a fillip to the domestic agricultural sector. To this end, the gov­er­nment floated the National Policy on Bio­fuels in 2018 and envisaged an in­di­cative target of 20 per cent ethanol blen­ding in petrol and 5 per cent blending of biodiesel in diesel by 2030.

In November 2020, the government dire­c­ted the Ministry of Petroleum and Na­tural Gas (MoPNG) to institute an expert gro­up to finalise a road map to not only ac­hie­ve year-wise blending targets for the next 10 years but also address the various policy implications of such a plan. It was also proposed that issues such as pricing of ethanol, matching the pace of the automobile industry to manufacture vehicles with ethanol-friendly engines, pricing of such vehicles and fuel efficiency of different engines be studied.

At an event on the World Environment Day on June 5, 2021, the Indian prime mi­nister announced the government’s deci­si­on to meet the target of 20 per cent et­hanol bl­en­ding in petrol by 2025, five ye­ars ahead of the original target. The prime minister also released the “Report of the Ex­pe­rt Com­mittee on Road Map for Ethanol Blending in India 2020-25”. The report laid out a detailed pathway for ac­hieving 20 per cent etha­nol blending. This roadmap also mentioned an intermediate milestone of 10 per cent blending to be achieved by No­v­ember 2022. He also launched the am­bitious E-100 pilot project in Pu­ne for the production and distribution of etha­nol across the country.

Government incentives

In March 2022, the union minister of sta­te for consumer affairs, food and pu­blic dis­tri­­bution, Sadhvi Niranjan Jyoti, in a written reply to a question in the Rajya Sab­ha, revealed the state-wise list of su­pplied quantities of ethanol, produced by distilleries in the country and suppli­ed to oil marketing compani­es (OMCs) for bl­ending with petrol, alo­ng with the blending percentage achie­ved under the EBP programme during et­ha­­nol su­pply years (ESY) 2018-19, 2019-20, 2020-21 and 2021-22.

According to data, the supply of ethanol to OMCs was a meagre 380 million litres, with blending levels of only 1.53 per cent in ESY 2013-14. From 2013-14 to 2020-21, the production of fuel-grade ethanol and its supply to OMCs increased by ei­ght times. In ESY 2020-21, 3,023 million litres of ethanol was supplied to OMCs, thereby achieving 8.1 per cent blending levels. In ESY 2021-22, about 1.13 billion litres of ethanol was blended with petrol as of March 13, 2022, amounting to a blending of 9.45 per cent.

The minister of state, in her written reply, mentioned various measures ta­ken by the central government in the past three years to increase the production of eth­a­nol to meet the blending target. The me­asures are:

  • Extending financial assistance in the form of interest subvention at 6 per cent per annum or 50 per cent of the interest rate charged by banks/financial institutions, whichever is lower, for five years, including a one-year mo­ratorium;
  • Fixing remunerative prices of ethanol produced from different feedstocks for the supply of ethanol to OMCs for every ESY;
  • Amending the Industries (Develop­me­nt & Regulation) Act, 1951 to en­su­re free mo­vement of ethanol in the country;
  • Re­ducing GST on ethanol meant for the EBP programme from 18 per cent to 5 per cent;
  • Allowing rice and maize as feedstock;
  • Extending the interest subvention Scheme to grain-based distilleries;
  • Is­suing of standard operating proce­du­­res by banks for faster loan sanctioning;
  • Simplifying environmental clearance procedures under the Ministry of En­vi­­ron­­me­nt, Forest and Climate Chan­ge;
  • Enhancing storage capacities to store ethanol;
  • Issuing a notification for 20 per cent blending from April 2023;
  • Notifying the use of automotive fuels E12 (12 per cent ethanol with 88 per cent pe­trol) and E15;
  • Notifying the direct sale of E100 by OMCs;
  • Envisaging the launch of E20 material-compatible vehicles from April 2023 and planning the launch of E20 en­gine-compatible vehicles from April 2025; and
  • Including flexi-fuel engine and components (capable of running up to E85 fuel) under the production-linked in­ce­ntive scheme.

The government’s efforts bore fruit as later in ESY 2021-22, the 10 per cent bl­en­ding target was also achieved.

Achieving 10 per cent ethanol blending target

In June 2022, owing to coordinated eff­orts of the state-owned OMCs, the target of 10 per cent blending under the programme was achieved much ahead of the targeted deadline of November 2022. Ac­cording to the government press re­lease, the development translated into a forex impact of over Rs 415 billion and re­duced greenhouse gas emissions of 2,700,000 MT, and led to the payment of over Rs 406 billion to farmers.The government also stated that OMCs have started to sign long-term ethanol off-ta­ke ag­reements with prospective project proponents to set up dedicated ethanol pl­ants in ethanol-deficit states.

Setting more ambitious targets

In April 2022, the minister of state for pe­troleum and natural gas, Rameswar Teli, in a written reply to a question in the Rajya Sabha, informed that based on the en­co­u­raging initiatives on the supply side of ethanol, the government had made a de­cision to advance the target of 20 per cent blending of ethanol in petrol from 2030 to 2025-26.

Subsequently, the MoPNG notified that oil companies will be selling up to 20 per cent ethanol-blended petrol from April 1, 2023. Similarly, an indicative target of 5 per cent biodiesel blending in diesel was proposed to be implemented by 2030.

Focus on domestic production of biofuels

The aim of the MoPNG has been to en­sure enough domestic production of et­ha­nol and biodiesel to meet the objectives of the EBP programme. To this end, the ministry has taken several initiatives, including the establishment of second-generation biorefineries and development of new feedstock for biofuels and new technologies for conversion to biofuels. It aims to develop a favourable environment for the integration of biofuels with primary fuels and has stated that it encourages in­di­genous feedstock supplies for biofuel production by utilising wasteland for feedstock generation. However, given the de­arth of domestic feedstock and requ­ire­me­nts for blending, the import of feedstock for biodiesel production has been allowed. To encou­rage the pro­duction of biofuels in units located in special econo­mic zones (SEZs) or ex­port-oriented units, the import of feedstock in order to produce biofuels mea­nt for exports has been permitted without any restrictions.

The way forward

In May 2022, the union cabinet appro­ved amendments to the National Policy on Biofuels, 2018. The policy was notified by the MoPNG in June 2018, superseding the National Policy on Biofuels, pro­mulgated through the Ministry of New and Re­ne­wable Energy in 2009. The fo­llowing are the main amendments approved to the Natio­nal Policy on Bio­fuels:

  • Allowing more feedstock for the production of biofuels;
  • Advancing the ethanol blending target of 20 per cent for blending in petrol to 2025-26 from 2030;
  • Promoting the production of biofuels in the country under the Make in India initiative, by units located in SEZs and export-oriented units;
  • Adding new members to the National Bio­fuel Coordination Committee (NBCC);
  • Granting permission for export of biofuels in specific cases; and
  • Deleting/Amending certain phrases in the policy, in line with decisions taken du­ring NBCC meetings.

Going forward, amendments are expected to facilitate domestic manufacturing of bio­fuels, thereby leading to a reduction in import of petroleum products.

The “Report of the Expert Committee on Road Map for Ethanol Blending in India 2020-25” points out a key challenge of fuel efficiency loss with ethanol blending. The report calculates that when using E20, there is an estimated loss of 6-7 per ce­nt fuel efficiency for four-wh­eelers, whi­ch are originally designed for E0 and calibrated for E10; 3-4 per cent for two-wheelers designed for E0 and calibrated for E10; and 1-2 per cent for four-wheelers de­si­gned for E10 and calibrated for E20. In the report, the So­ciety of Indian Auto­mobile Ma­nu­fac­tu­rers has suggested that with mo­di­fic­a­tions in engines (hardware and tu­ning), the loss in efficiency due to blended fuel can be reduced. Besides, to compensate consumers for the drop in efficiency from ethanol blended fuels, tax incentives on E10 and E20 fuel may be considered. Critics also point out that the governme­nt cannot expect auto manufacturers to invest in flex-fuel engines so quickly. Even if blending targets are being met, is the fuel in abundant supply to run all the flexi-fuel engine cars on the road? This is a pertinent question that needs to be ex­pl­or­ed by all stakeholders, going forward.