Ethanol Blending Programme

The Ethanol Blending Programme (EBP) is a strategic initiative by the Government of India to blend ethanol with petrol, reducing dependency on fossil fuels, enhancing energy security, and providing an alternative market for agricultural produce. While the programme has achieved considerable progress, especially in recent years, it continues to face structural, logistical, and economic challenges that impede full-scale implementation across the country.

Background and Objectives

The Ethanol Blending Programme was launched in 2003 by the Ministry of Petroleum and Natural Gas with the initial goal of 5% ethanol blending (E5) in petrol. The target has since been progressively enhanced — to 10% (E10) by 2022 and 20% (E20) by 2025. Ethanol, a biofuel derived primarily from molasses, sugarcane juice, damaged grains, and surplus food grains, serves as a renewable additive that improves combustion efficiency and reduces vehicular emissions.
The principal objectives of the EBP are:

• To reduce import dependency on crude oil.
• To promote use of renewable and domestically produced fuel.
• To ensure better remuneration for farmers through value addition to crops like sugarcane and maize.
• To contribute to carbon emission reduction and environmental sustainability.

Progress of the Programme

India’s ethanol blending percentage has shown remarkable growth in the past decade. From less than 2% in 2014, blending levels reached over 12% by 2023, positioning India among the top ethanol-consuming nations. Ethanol production capacity has expanded significantly, with the establishment of distilleries using multiple feedstocks, particularly under the ‘Pradhan Mantri JI-VAN Yojana’ and National Biofuel Policy, 2018.
However, the journey towards achieving E20 blending remains complex due to several interrelated issues spanning production, pricing, infrastructure, policy, and sustainability.

Feedstock-Related Issues

One of the foremost challenges in the EBP relates to the availability and sustainability of feedstock.

• Dependence on sugarcane: A large proportion of India’s ethanol is derived from sugarcane-based molasses. Over-reliance on a water-intensive crop raises sustainability concerns, especially in drought-prone regions such as Maharashtra and Karnataka.
• Competition with food security: Diverting sugarcane juice or food grains like maize, rice, and broken rice for ethanol can conflict with food supply objectives, particularly during years of poor harvest or inflation.
• Feedstock price volatility: Fluctuations in sugar and grain prices affect ethanol cost structures and discourage consistent production.
• Limited use of second-generation (2G) biofuels: Despite technological advancement, cellulosic ethanol production from agricultural residues (such as paddy straw or bagasse) remains minimal due to high capital and operating costs.

Production and Supply Constraints

• Inadequate distillation capacity: Although capacity has expanded, production remains concentrated in a few states such as Uttar Pradesh, Maharashtra, and Karnataka, leading to uneven supply across the country.
• Delayed project clearances: Establishment of new distilleries requires multiple environmental and financial approvals, often resulting in long gestation periods.
• Seasonal operation: Sugar-based distilleries typically operate only during the crushing season, limiting year-round ethanol availability.

Distribution and Logistics Issues

The transportation and blending of ethanol present major logistical challenges:

• Regional imbalance: Ethanol surplus states are mostly in the north and west, while major consumption centres are in the south and east, necessitating long-distance transport.
• Storage and safety: Ethanol is highly flammable, requiring specialised storage facilities and strict safety protocols, which are inadequate in many regions.
• Blending infrastructure: Not all oil marketing company (OMC) depots possess blending facilities, causing delays and increased costs.
• Transportation bottlenecks: Ethanol is largely transported by road tankers rather than pipelines, adding to costs and accident risks.

Pricing and Policy Challenges

The ethanol pricing mechanism has been revised several times to ensure remunerative returns to producers, yet inconsistencies persist:

• Differential pricing: Separate prices for ethanol derived from C-molasses, B-heavy molasses, and sugarcane juice/grains complicate procurement and discourage non-cane-based production.
• Delayed payments: Producers often face delays in receiving payments from oil marketing companies, affecting liquidity and production continuity.
• Taxation and inter-state movement restrictions: Some states impose export/import duties, excise taxes, or licensing restrictions, fragmenting the ethanol market.
• Uncertain long-term policy environment: Frequent policy changes and absence of a long-term purchase guarantee deter private investment in distilleries and 2G biofuel technologies.

Environmental and Sustainability Concerns

While ethanol blending is promoted as a green initiative, its environmental credentials are debated:

• Water footprint: Producing 1 litre of ethanol from sugarcane can consume up to 2,800–3,000 litres of water, exacerbating stress in water-scarce regions.
• Soil degradation and fertiliser use: Continuous sugarcane cultivation depletes soil nutrients and increases fertiliser dependency.
• Lifecycle emissions: The net carbon reduction depends on the energy source used during distillation; coal-based distilleries offset much of the intended emission savings.
• Food-fuel conflict: Ethanol derived from food grains can indirectly contribute to inflation and food insecurity if not managed through surplus or damaged grain channels.

Technological and Research Gaps

India’s ethanol ecosystem still lacks sufficient technological innovation for cost-effective 2G and 3G biofuel production.

• Limited commercialisation: Pilot projects for 2G ethanol (e.g., Indian Oil’s Panipat plant) have not yet reached full-scale commercial viability.
• High production costs: Advanced biofuel technologies require significant investment and skilled labour.
• Need for R&D: Greater emphasis is required on biotechnology for enzyme development, process optimisation, and utilisation of non-edible biomass.

Institutional and Implementation Challenges

• Coordination between ministries: The EBP involves multiple ministries — Petroleum and Natural Gas, Food and Public Distribution, Agriculture, and Environment — often leading to overlapping jurisdictions.
• Monitoring and quality control: Inconsistent quality of ethanol supplied by small distilleries can affect engine performance and safety.
• Vehicle compatibility: The transition to E20 requires modification of existing engines, particularly in older vehicles. Automobile manufacturers need sufficient lead time for redesign and compliance testing.

Socio-Economic Implications

Despite its challenges, the EBP has significant socio-economic benefits such as increased farmer income, employment generation in rural areas, and promotion of circular economy practices. However, ensuring equitable distribution of benefits and mitigating regional disparities remain crucial policy goals.