The most rationale and forward thinking programme in the government’s biofuel policy—the Ethanol Blending Programme (EBP)—has had to face an uphill battle since it was first envisaged way back in 2003. Success now seems not too distant. The second ethanol procurement tender by the oil marketing companies (OMCs) has received overwhelming response with 80 participating suppliers as against 60 in the last tender. The quantity supplied in this tender combined with the previous purchase by OMCs of 40 crore litres should complete the 5% EBP requirements. The OMCs floated a fresh domestic tender on July 22 for procuring 133 crore litres of ethanol for blending with petrol during the period December 2013 to November 2014.
The government mandated 5% blending in September 2006, raised the level to 10% in October 2007 and made blending compulsory in October 2008. But the program still faced hurdles when the government set up high powered Saumitra Chaudhuri committee, and on its recommendation mandated the fuel ethanol program with a deadline for implementation by June 2013. Owing to the government’s initiatives, what seemed earlier a distant dream now seems an inevitable reality. There are 11 states where petrol is powered by 5% ethanol while UP and Uttarakhand have 10% ethanol blended in petrol with Karnataka lining up to join them. Yet, there are many miles to go and owing to some reason or the other—most of which seem insignificant in the face of the nation’s overall fuel security goals—the policy is still to take full effect across the country.
It is with great foresight that the government has conceptualised this policy that directly addresses twin goals of energy security and benefit to farmers, which are a concern of any nation. Now, everybody is aware that even a small geopolitical tension, like that in Syria, or depleting foreign exchange reserves, as happened with India in 1991, can seriously jeopardise the fuel economics, especially in a country like India which meets nearly 80% of its fuel requirement from imports.
With the fossil fuel option fading fast, ethanol has become the way to go given that it is a clean and renewable source of energy. Just by upgrading to the 10% blend from the currently mandated 5% one, India stands to save R8,000-9,000 crore of FX being used to import crude oil. This will ease a significant bit of the pressure on India's CAD, not to mention the massive environmental benefit in the form of reduction of the country's carbon footprint.
Moreover, ethanol is home grown and is a by-product of cane molasses produced in sugar mills. In India, a sugar surplus country, more than 75% of the revenue of the sugar industry is shared with the farmers as cane payment. Sugar mills can increase their revenue by diverting more molasses towards the production of ethanol. It will have dual benefit. By reducing the sugar surplus; government can cut down its export subsidy on sugar and can use the excess ethanol to run EBP. Hence, farmers stand to equally benefit from the blending programme.
There may be some issues like the cyclical nature of sugarcane production, skewed supply of ethanol, the creation of ethanol-mixing infrastructure, etc, that pose challenges to the implementation of the policy. But these problems have solutions too. India can draw lessons from Brazil, where 51% of the fuel market is catered to by sugar-based ethanol making it the leading bio-fuel exporter and the second-biggest producer after the US. With increasing coordination between OMCs and suppliers and the resultant spurt in confidence between the two, this programme will certainly get its due. It is up to the government to decide which interests to take into account—the larger interest of India’s fuel security along with farmers’ benefit or the vested interests of various groups.
Policymakers should take notice of the fact that countries like the United States now have effective blending programmes that involve up to 20% ethanol. Unlike US, where most of the ethanol is derived from corn which is also a food crop, there is no debate over food versus fuel in India as ethanol is derived from molasses, a by-product of sugarcane. It is high time that we get the ball rolling. Or are we waiting for another supreme Court ruling like the CNG-based public transport one in Delhi before the programme is implemented?
Like the old saying goes—where there is a will, there is a way. EBP will see the light of the day. Critics may still raise doubts on ethanol availability but if ethanol derived from molasses falls short, other solutions could be tapped. We would be able to judge the feasibility of the programme only when it is implemented. No programme is a success overnight; it takes time and due diligence to make it a success. I hope EBP will get its due chance this time. I hope it does not remain an idea whose time remains elusive.