There are 3 important by-products in the sugar industry viz. molasses, bagasse and press mud. While bagasse is used to generate electricity, a large part of which is exported to the power grid, molasses is used to produce rectified spirit/alcohol for making liquor and fuel and press mud is used to produce high quality manure.

Traditionally, molasses has been used in India to produce rectified spirit and alcohol of about 95% purity for producing liquor for human consumption and for producing various chemicals. However, with technological developments in the recent past, molasses has been effectively used to produce bio-ethanol for blending with petrol as a fuel.

Not only does the bio-ethanol blending programme reduce India’s dependence on fossil fuel imports and allows the nation move slowly but surely towards energy sufficiency, it also has other very important advantages of being the best oxidant which helps burn the petrol better when blended with it, thereby reducing environmental pollution that fossil fuel are infamous for. With its anti-knocking property, it helps improve the life of engines. At 5% blending with petrol, researches carried out by the public sector oil companies in India have shown that the fuel efficiency improves significantly. Therefore, the consumers gain with better mileage per litre at 5% ethanol blends, lower environmental pollution and longer life of engines.

The Government of India realized the benefits of fuel ethanol use in India. With a vibrant and fast growing sugar industry, India being the second largest sugarcane producer in the world, it accepted that there is a huge potential of production and availability of the fuel ethanol. Further, it was accepted by the Government in 2006, that a mandatory 5% ethanol blending with petrol (EBP) programme would directly benefit the sugarcane farmers by assuring the sugar industry a stable and reasonable return for the molasses and then passing a significant part of the same to the farmers. The Central Government even amended the Sugarcane (Control) Order, 1966, to consider returns on molasses while fixing the price payable by sugar mills for cane to farmers. Therefore, better and stable returns on molasses directly translate into better payments to farmers.

However, there were some initial doubts raised by Ministry of Petroleum and Ministry of Chemicals on the pricing and availability of ethanol for the programme. Some initial teething problems were also faced from some States which were levying taxes and duties on ethanol, even though the Supreme Court had held that alcohol not for human consumption i.e. fuel ethanol was not within the purview of the States. After lot of deliberations at various levels in the Government, which included inter-Ministerial meetings, Empowered Group of Ministers and Cabinet, which must have each met a few times, during the years from 2007 to 2010, the Government reiterated its earlier decision of the 5% mandatory EBP programme. During these deliberations, doubts on availability of alcohol, raised by the Ministry of Chemicals, to meet the demands of all three competing demands viz. potable alcohol, fuel ethanol and chemical industry, were discussed. It was specifically decided that whenever the Ministry of Chemicals felt that there would be shortage of alcohol from domestic sources, the Government would reduce customs duty for import of molasses and alcohol by the chemical sector.

However, since the EBP programme was conceived to directly benefit the sugarcane farmers, the Ministry of Petroleum and Oil Marketing Companies (OMCs) put a specific condition in September 2010, for procurement of ethanol for blending with petrol. As per this condition, ethanol should be produced from domestic molasses only. It therefore required that molasses or alcohol cannot be imported by the ethanol producers and the ethanol will have to be produced only from molasses and not sugarcane juice or foodgrains.

The expert panel for pricing of ethanol has recommended in March 2011 for a linkage of price of ethanol to petrol. The formula would ensure that the ethanol procurement price will always be lower than the petrol price. To ensure more supplies of ethanol for the programme, it will be important for the Government to quickly announce the formula for the final price, which is now pending with them for over 2 months.

India has an indigenous installed capacity to produce over 400 crore liters of rectified spirit/alcohol and over 150 crore liters of fuel ethanol, which is sufficient to meet requirement for 7-8% ethanol blending with petrol. The national bio-fuel policy, approved by the Government, has plans for a 20% ethanol blending programme by 2017. This can be achieved only if we continue with the approved plan of the Cabinet, reiterated again and again by the Government. Questions and doubts will be raised by vested interests who do not see a fortune for themselves if the EBP programme succeeds, but the sugar industry hopes and expects that the Government of India seriously follows its approved 5% mandatory ethanol blending with petrol programme, which will be so essential for the energy security of the nation and which will help reduce pollution from fossil fuel and improve our use of renewable energy in the form of fuel ethanol. We hope the Government issues the tender for procurement of fuel ethanol for 2011-12 by July 2011.