Food vs. Fuel: The status of the Center’s ethanol blending program

The Center has restricted the sweetener’s diversion for ethanol production as the next step in increasing domestic supply after outlawing sugar exports.

On December 7, all mills and distilleries were instructed, “with immediate effect,” to stop using sugarcane juice or syrup to make any ethanol. This directive came from the Ministry of Consumer Affairs, Food, and Public Distribution.

Fuel may be mixed with 99.9% pure alcohol to create ethanol. One of the major achievements of the Narendra Modi administration has been the ethanol-blended petrol (EBP) initiative. The average percentage of ethanol blended with gasoline in all of India increased from 1.6% in 2013–14 to 11.8% in 2022–2023.

substitute raw materials

Diversification of feedstock has been essential to this.

Typically, so-called C-heavy molasses is used to make ethanol, or even 94% pure industrial-grade rectified spirit and 96% extra neutral alcohol for drinkable liquor. Cane with 13.5–14% total fermentable sugars (TFS) is usually crushed in mills. You may recover around 11.5% of it as sugar from the juice. The non-recoverable, uncrystallized 2.5% TFS is added to molasses that is rich in C. After fermentation and distillation, a tonne of this liquid, which has 40–45% sugar, yields 220-225 liters of ethanol.

However, instead of extracting 11.5% sugar, mills are only able to extract 9.5–10%, diverting the remaining 1.5–2% TFS to an earlier stage of molasses known as “B-heavy.” With more than 50% sugar, this molasses produces 290–320 liters of ethanol per tonne. A third alternative is to ferment the whole 13.5–14% TFS into ethanol without producing any sugar. Thus, 80–81 liters of ethanol may be produced from one tonne of cane, as opposed to 20–21 liters and 10–11 liters via the B–heavy and C–heavy molasses methods, respectively.

Food vs. Fuel: The state of the Center’s ethanol blending program

After mills began producing ethanol from B-heavy molasses and concentrated sugarcane juice/syrup in 2017–18, the country’s ethanol output increased significantly (Table 1). Furthermore, fresh substrates were used, including broken or damaged foodgrains, maize, and excess rice from Food Corporation of India (FCI) inventories. Starch found in grains must be broken down by yeast into sucrose and the simpler sugars glucose and fructose in order for them to be fermented. Despite the lengthier procedure (molasses contains fermentable sugars already), grain yields of ethanol are greater, ranging from 380 to 480 liters per tonne.

The Modi government’s decision to pay mills extra for ethanol produced from feedstocks other than C-heavy molasses gave the EBP scheme its true boost. The ex-distillery price of ethanol that state-owned oil marketing companies (OMS) must pay for 2022–2023 was set at Rs 49.41 per litre if made from C–heavy molasses; however, if made from B–heavy molasses, sugarcane juice/syrup, surplus FCI rice, broken/damaged grain, and maize, the price was Rs 60.73, Rs 65.61, Rs 58.50, Rs 55.54, and Rs 56.35, respectively. Throughout the prior supply years (December through November) up to 2017–18, the OMCs paid the same price for ethanol regardless of the feedstock.

The differential pricing approach is credited by Tarun Sawhney, vice chairman and managing director of Triveni Engineering & Industries Ltd (TEIL), for the success of the EBP program.

The distilleries owned by TIEL in Uttar Pradesh are fed with two different types of materials: grain during the off-season (May-October) and B-heavy molasses during the cane crushing season (November-April). The latter was mostly made up of FCI rice, whose delivery was halted in July 2023 due to worries of running out. The business subsequently shifted to purchasing maize and damaged/broken rice at a greater cost from the open market. In August, the Central government increased the price at which it would purchase ethanol made from damaged grain and maize to Rs 64 and Rs 66.07 per liter, respectively.

“The government’s ethanol program has been quite encouraging, particularly in terms of the cost and use of substitute feedstocks. The EBP program is no longer dependent on a particular crop or feedstock. Previously, feedstocks derived from sugarcane accounted for 100% of ethanol production (as of 2022-23). In the next year, I predict that percentage will fall below 50% and grain prices will rise accordingly, said Sawhney.

Not as charming

However, the December 7 decision is a blow for the sector, particularly for businesses that have established facilities to generate ethanol directly from cane juice or syrup, such as Balrampur Chini Mills, Shree Renuka Sugars, Ugar Sugar Works, and Nirani Sugars.

In order to meet their 15% blending objective, the OMCs published a contract for the delivery of around 825 crore liters of ethanol for 2023–2024. They got proposals for around 559 crore liters in the first round of bids early last month, of which 135 crore liters were made of ethanol made from sugarcane juice or syrup. The majority of the later shipments may be impacted by the December 7 directive, which might result in stranded capabilities.

As of right now, the Center has declared that the supply of ethanol made from B-heavy molasses “will continue” in response to “existing offers received by OMCs.” It has not yet disclosed the costs for ethanol produced from different feedstocks that mills would receive in 2023–2024. This is true even if the ethanol supply year was rescheduled from December to November to November to October in order to coincide with the October mill-crushing start of the sugar year.

Concerns about the sugar supply

There’s a straightforward explanation for the Center’s seeming slowness in mixing ethanol. The sugar reserves at the conclusion of the 2022–2023 sugar year were slightly over 57 lakh tonnes (lt), which is much less than the record 143.3 lt of 2018–19 and the lowest since the 39.4 lt of 2016–17 (Table 2).

Food vs. Fuel: The state of the Center’s ethanol blending program

Apart from the six-year low opening stocks, the output for the current 2023–24 year is unknown. This year’s production is expected to be 291.50 lt by the National Federation of Cooperative Sugar Factories, down from 330.9 lt and 359.25 lt in 2022–2023 and 2021–2022 respectively. It is anticipated that Maharashtra and Karnataka will have especially steep drops due to little rainfall and low reservoir levels in their primary cane-growing regions.

About 15 lt of extra sugar is anticipated as a consequence of the December 7 order; this sugar would have otherwise been used to produce ethanol by way of cane juice or syrup. In addition to increasing physical availability, this more sugar on the market will help quell any positive enthusiasm over prices.

One thing is evident from the most recent decision when combined with the suspension of sugar exports as of May 2023. Governments give preference to domestic supplies over exports, consumers over producers, and food over fuel. Even more so with this regime.