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.