Policy
Ahead Of Rivals In the Race: New York-based Apollo Global Offers Enticing Package To Win BPCL
more...


ONGC’s Overseas Oil Assets Acquisition At A Standstill
more...


Discovering Market Price For Domestically Produced Gas
more...


Is Adani Stealing A March Over Reliance Industries In Clean Energy?
more...


Difficult To Sustain Present GRMs As Crude Prices Rise
more...

Regulation
Oil PSUs In A Fix Over Government’s Conflicting Demands
more...


Oil India Finalises An Ambitious Drilling Plan For Upper Assam Districts
more...


GAIL To Supply Gas From Kochi LNG Terminal To MRPL
more...


Auto LPG Struggling To Make A Mark In Indian Market
more...

Alternative Energy / Fuel
MoPNG Signs MoU with Companies For CBG Plants
more...

New Projects
Sembcorp Energy India Wins 400MW Capacity Solar Power Project
more...


L&T Bags Over ₹70 billion Refinery Project In Rajasthan
more...


Kochi-Mangaluru Gail Pipeline Inaugurated
more...

Market Watch
RIL-BP To Offer Online Fuel Delivery Services Next Year
more...


Coordinated Imports Of Crude Oil For The Indian Market
more...

Companies
Sembcorp Industries
more...


L&T Hydrocarbon Engineering Bags Order From ONGC
more...


Praj Industries Bags Rs 2.26 Billion Order From IOC
more...


VoltUp Partners With HPCL For Battery Swapping Centres
more...

Press Release [FREE Access]
Petro Intelligence » Ethanol Doping Conundrum

By R. Sasankan

India has finally decided to step on the gas -- quite literally when it comes to ethanol blending of auto fuels. The ministry of petroleum and natural gas (MoPNG) has suddenly decided to up its goal for ethanol blending of petrol to 20 per cent by 2025 from its current level of 5 per cent. Many believe it is a laudable goal but wonder if the government has really thought through the consequences of the strategy with a clearly worked out assessment of the rewards and the risks that such an enterprise involves.

Let us start with the basics: ethanol, also called ethyl alcohol, is naturally produced by the fermentation of sugars by yeasts or via petrochemical processes such as ethylene hydration. It has medical applications as an antiseptic and disinfectant. It is also used as a chemical solvent and in the synthesis of organic compounds. But its real attraction today is that it serves as an alternative source of fuel at a time when global fossil fuel reserves are at increasing risk of running out.

Dr Surya P SethiThe largest single use of ethanol is as an engine fuel and fuel additive. Brazil is one of the globe's leading producers of ethanol and has achieved enormous success by harnessing ethanol as an engine fuel. Gasoline sold in Brazil contains at least 25 per cent anhydrous ethanol. Hydrous ethanol (about 95 per cent ethanol and 5 per cent water) can be used as fuel in more than 90 per cent of new gasoline-fuelled cars sold in the country. Brazilian ethanol is produced from sugar cane and is noted for its high carbon sequestration. The US and many other countries primarily use E10 (10 per cent ethanol, sometimes known as gasohol) and E85 (85 per cent ethanol) ethanol/gasoline mixtures.

India first flirted with the idea of blending ethanol with petrol in 2003 when domestic crude production started to stagnate and fuel consumption started to rise sharply. There was a sound logic behind the move: the government wanted to tamp down on its mounting crude import bill. But the country's has had a very chequered history with the use of ethanol blended auto fuels. The scheme had floundered from the start because it was launched without conducting a proper study to determine the cost of production and availability of ethanol. The initial goal was ambitious with the objective of 10 per cent ethanol blending with petrol but was quickly scaled down to 5 per cent. It was once again raised to 10 per cent but the blending rate never topped 5 per cent. The Modi government tried to rescue the scheme by raising the procurement price of ethanol for oil marketing companies.

The ham-handed approach to ethanol blending continues and this bedevils the chances of success. The government had earlier fixed a target of 10 per cent ethanol blending by 2022, and 20 per cent blending by 2030. But it has now reworked the plan and intends to directly focus on the 20 per cent target by 2025.

Will the strategy work this time?

I have written extensively on the topic but still thought it advisable to seek enlightenment from subject experts. I decided to approach Dr Surya P. Sethi, India’s top energy expert who worked as the country’s principal advisor (energy) for close to a decade. (He returned to India from the International Finance Corporation at the invitation of then Prime Minister A.B. Vajpayee). Dr Sethi knows the subject pretty well.

According to Dr Sethi, advancing the 20 per cent ethanol blending goal from 2030 to 2025 might be a laudable objective from multiple perspectives including diversification of the energy basket, the opportunity to reduce dependence on crude oil imports, lowering greenhouse gas emissions, and addressing the stresses in the politically-charged sugar sector. However, it is far from certain that the move has been dictated by serious evidence-based research and analysis of the economic and ecological costs and the benefits. If it isn't, then one can only surmise that the policy initiative is being driven by short-term political exigencies.

“One can live with the shorter-term exigencies only if the longer-term benefits are clearly established. If indeed MoPNG’s decision is based on solid evidence-based research, it would be worthwhile to place the findings in the public domain and invite comments from area experts,” said Dr Sethi. Petroleum minister Dharmendra Pradhan is known to be receptive to ideas and a wider consultation on the subject will only enhance his prestige and strengthen his stand on ethanol blending.

But let us first acknowledge three unpleasant realities while discussing the issue of ethanol blending: first, India is not Brazil. Indian sugarcane-based ethanol consumes more energy than it delivers; a higher level of blending will necessitate major modifications in the current breed of petrol engines. As a result of the way in which India produces sugar cane and corn (with extensive use of pumped water, fertilizer and pesticides), the energy used to produce a litre of ethanol is about 120 per cent of the energy contained in that unit of ethanol.

Brazil’s per capita arable land availability is over three times that of India and its fresh water availability per capita is 25 times that of India. It is also true that as much as 5 million hectares of arable land has already been put under water-guzzling sugarcane cultivation in water-starved India, including in States that are fast running out of fresh water reserves. This is because sugarcane has become the most profitable cash crop based on politically-driven pricing policies that pay a high price for sugarcane irrespective of the prevailing market price for sugar.

Second, there is a glut in sugar markets worldwide. The sugar price realized by Indian sugar producers, even in the protected domestic market, is roughly 12-15 per cent below their cost of production largely because of the politically-driven fair and reasonable price of sugarcane. While some private sugar mills have closed down, the politically controlled cooperatives have continued producing. As a consequence, sugar cane producers are owed huge arrears by the mills and this has become a burning issue that makes State and Central Governments vulnerable. The Central Government has been forced to subsidize the export of surplus sugar. In effect, this has become a subsidy for the export of already scarce water because producing one kilogram of sugar requires up to 2 tons of water.

 Converting molasses to ethanol with a guaranteed off-take price, irrespective of the international crude-oil price will shift the problem to the oil and gas sector which is arguably less politically sensitive in the short run. But here is the paradox: just as the export of sugar came at the cost of the tax payer, the lower crude oil import bill could also be at the cost of the same tax payer.

Finally, there is the ecological footprint of sugar cane that needs to be considered. Says Dr Sethi: “More important, though, is the ecological footprint of sugarcane based bio-ethanol, given its high water-dependence and the nagging doubts about the overall energy balance of sugarcane-based bio ethanol under India-specific conditions that varies from State to State. There are alternative lignocellulosic feedstocks that might have a lower ecological footprint and a higher overall energy balance on the basis of a detailed life-cycle assessment under India and State -specific conditions. Such a life cycle assessment of energy balance should not be limited to just the production of the bio-ethanol but must also include end-use efficiency of the bio ethanol produced since its heating value is only about two thirds that of the fossil fuel it replaces. Higher levels of ethanol blending for the transport sector could lead to non-linear loss in the overall efficiency of the current breed of engines being used, without modifications or the use of flex-fuel engines.”

That brings us to a politically inconvenient outcome. The solution to the problem that might be in the long-term interest of India, her farmers and her ecological sustainability is to reduce sugar cane cultivation, especially in water-starved States. We could still pursue ethanol blending based on alternative lignocellulosic feedstocks available or grown locally and/or import of bio ethanol at internationally competitive prices. But we must first learn to acknowledge that the ethanol blending policy has been floundering in the absence of a defensible and clear-headed analysis of its costs and benefits and a strategy that addresses the concerns of all stakeholders.



To download the latest issue 'Volume 27 Issue 19 - January 10, 2021', click here
Petro Intelligence [FREE Access]
Ethanol Doping Conundrum
more...

BPCL Selloff: ‘Multiple Bids’ May Mask Strategic Options
more...

Ratnagiri Refinery: Need To Expose The Forces Out To Scuttle Project
more...

Driftwood Goes Adrift: PLL Asserts Its Independence
more...

Foreign Investment
India And Qatar Set Up Task Force To Identify Projects For Investment
more...

Overseas Investment
GeoPark’s Update Of OVL Operated CPO-5 Block
more...


ONGC Videsh Is The Leading Overseas Investor In 2020-21
more...

Gas Scene
Natural Gas Price Trends: Global & Domestic
more...


Domestic Natural Gas Scene In November 2020
more...


Latest Demand Projections for Natural Gas
more...


Coal Bed Methane (CBM) gas development in India
more...


Natural Gas Price Trends: Global and Domestic
more...


Capacity Utilisation of LNG Regasification Terminals (As on November 1,2020)
more...


Domestic Natural Gas Scene Improves In October, But Still Below 2019 Level
more...


Market Natural Gas and CGD: Attractive Industry
more...


Natural Gas Price Trends: Global And Domestic
more...


Natural Gas : Historic Data On Domestic Production, Import & Consumption
more...


Gas to peak last among fossil fuels
more...


Domestic Gas Scene In September 2020: Production, import, availability and sector-wise consumption
more...


Gas: Increasing Import Dependency, Stagnant Domestic Production
more...


Global Natural Gas Price Trends
more...


Natural Gas Price Trends: Global And Domestic
more...


Recoverable Coal Bed Methane Reserves
more...

Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Status of blocks under NELP as on 1st October, 2020
more...


Global and Region-wise Rig Count in November 2020
more...


Price Movements in Indian crude basket in December 2020
more...


Comparision of Production and Consumption of Petroleum Products (April - November 2019 & April - November 2020)
more...


Petroleum Products Import Goes Up In November, LPG, Petcoke Top The List
more...


India’s Crude Oil Import Declines In November, OPEC Share further Down
more...


Crude Processed In November 2020
more...


Ethanol Blending Programme (November 2020)
more...


Industry Consumption Trend Analysis 2020-21
more...


Power supplied and deficit: Region-wise position for November 2020
more...


Passenger Vehicle Sales Cloak Growth In November
more...


Petroleum Products Consumption Edges Up In November 2020
more...


Oil India’s International E&P Portfolio
more...


India’s Drilling Activities Remain Unchanged
more...


Global Oil Demand Revised Down
more...


Global Rig Count vs. Crude Prices
more...


Industry marketing infrastructure (as on 1st November. 2020)
more...


Indian crude oil basket price in November 2020
more...


Consumption Growth Of Petroleum Products
more...


Sales of Passenger Vehicles, Two Wheelers Up As Economy Recovers
more...


Power supplied and deficit: Region-wise position for October 2020
more...


Sharp Decline In Petroleum Products Import In October 2020
more...


Petroleum Products Consumption Registers Growth In October 2020
more...


Crude Oil Processed Still Lower, Share Of Domestic Crude Up In October
more...

Tenders [FREE Access]
RIL
more...