India’s sugar industry set for windfall amid ethanol push

August 16, 2022
The Times of India |

India’s determination to increase use of biofuels drove a massive increase in ethanol production in the last 5 years and continuing. The demand for ethanol is keeping the pace and is only set to grow as the nation pushes toward its aim of attaining ‘energy independence’.  India has set a bold target to completely eliminate its reliance on energy imports by the time it celebrates 100 years of independence. Biofuels, and especially ethanol, is the key part of Government’s energy independence strategy. 

Biofuel is fuel produced from natural biomass such as sugarcane juice, corn, and even grains and nuts etc. It helps in burning the carbon fuel efficiently resulting in far lower carbon emissions. These fuels are farmer friendly and is also a catalyst for rural growth. 

The use of blended fuels got off to a slow start in India. However, Government measures to boost the ethanol blending in petrol, has driven a rapid acceleration in the use of blended fuels. So rapid has this transition been that the government has actually brought forward blending targets set out by the National Policy on biofuels.

First laid out in 2018, the policy had initially targeted the year 2030 to achieve 20% ethanol blending petrol, which was brought forward by five years to 2025-26. It is a matter of pride for India that the country has one of the fastest growing ethanol program in the world. The current ethanol blending has exceeded 10% in India. 

This shift toward biofuels is a welcome one, especially with the costs of energy dependence and also climate change-inducing emissions more evident than ever in today’s high fuel-price-and-extreme-weather environment. 

India imported 185 million tons of petroleum at a cost of $55 billion in 2020-21, according to a report from the NITI Aayog Committee. The India transportation sector is mostly dependent on imported fuels, which is not good for a growing economy like India as it is results in imported inflation, volatility in fuel prices, energy dependence and a slower economic growth. Ethanol can help in reducing the imports, foreign exchange outgo and at the same time result in rural growth because it is a agriculture based fuel.

Ethanol also produces just half the greenhouse gas emissions as compared to carbon based gasoline products and thus has a central role to play in helping India realize its ambitions to decarbonize its economy.

In order to meet the revised 2025 E20 target, ethanol production would have to grow to 1,016 crore litres by 2025. For context, ethanol production stood at 302 crore litres during ESY (Ethanol Supply Year) 2020-21, according to government data, which in itself was a 75% increase from the previous year. 

Our current ethanol production capacity, meanwhile, is roughly 800 crore litres, according to NITI Aayog.

The rush to meet this anticipated ethanol demand, therefore, could provide a windfall for the sugar industry as sugar ethanol is the most viable and cheaper source of fuel ethanol.

Ethanol can be produced from a number of sources, including corn, barley, rice and sorghum. But most of India’s ethanol is produced from sugarcane, with molasses-based distilleries making up 426 core litres of the overall production capacity, according to NITI Aayog. India’s sucrose (sugar) production has reached 40 million tonnes against the consumption of 27 million so 13 million tonne of excess sugar can be diverted for production of ethanol as against 4.5 million tonnes being done currently. This excess production is being exported now. India exports are likely to touch 11 million tonne this year. 

This has made India as the second-largest exporter of sugar in the world after Brazil but exports are not a long term solution as global supply gluts, higher prices for Indian sugar compared to other sugar producers due to higher sugarcane price as well as global surplus production means stocks in India may lie idle, with payments to sugarcane growers held up.

Government of India is rolling out incentives to boost ethanol production, surplus sugar production can be redirected to the manufacture of ethanol, allowing it to be used up and, more crucially, and monetised. Government is thus rightly pushing the ethanol production and increasing the consumption by increasing the ethanol blending percentage year on year. The modern technology based automotive which can use 20 percent ethanol blending fuel are on the anvil followed by flexi fuel cars which can run on 100% ethanol.

Once technology allowing ethanol to be blended with diesel, which is already being developed, is introduced, it has the potential to unleash even greater gains for the sugar industry.

India’s diesel consumption is as much as 2.5 to 3 times its consumption of petroleum. Thus the ability to blend ethanol into diesel, once accessible, can potentially triple the size of the market for sugar producers. And this is without taking into account the trickle-down revenue opportunities, with every stage of sugarcane processing generating a monetisable by-product.

To put it simply, the sugarcane industry is the backbone of India’s sustainable and renewable fuels push. It is indispensable to India’s ambitions to slash its current account deficit, attain energy security and meet its 2070 net-zero carbon emissions target. 

The sugar industry is bound to gain from increasing ethanol program in the country as it powers the country’s self reliance and carbon free dreams, it is set for a bright and prosperous future itself.