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Sugar & Ethanol

Effective ethanol blend rates, policy, and opportunities for Indian biofuels

Posted by on 25 February 2020
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Vinay Joshi is Member of Board of Directors of Godavari Biorefineries Ltd. in his capacity as Executive Director since 2010 and is a committee member of Indian Sugar Mills Association (ISMA) - an apex body of Indian Sugar Mills and also a member of Finance and Taxation Panel of Confederation of Indian Industry (Maharashtra region).

He has previously served at the President of The South Indian Sugar Mills Association – Karnataka (SISMA-K) from 2016 – 2017, and has also represented the interests of sugar, ethanol and power industry before the Government of India and Provincial / State Government authorities in India.

At World Ethanol & Biofuels, we sat down with Vinay to discuss the changes in the effect blend rate of ethanol in India. We also discussed ethanol policy, investment and whether a switch to ethanol production can turn around the financial issues faced by the Indian sugar sector.

Watch/ Read the interview below.

There is definitely an opportunity for suppliers and investors in 2G technology ethanol projects.

Q: What is the effective blend rate in India at present?

Vinay Joshi: In 2017-2018 the effective blend rate was about 4.1% - about 1.5 billion litres of ethanol.

In 2018-2019, the blend rate has gone up to approximately 5.7% dispatches by October. The effective dispatches to date were about 1.7 billion litres.

These increases happen because of the B-heavy molasses-based ethanol as part of a policy which was announced by the government in early of 2018. We expect this growth to continue with the help of the new investments which are coming online in the next 2 – 3 years.

Q: What policy changes account for the increase in Indian ethanol consumption?

VJ: The policy regarding the preferential pricing for B-heavy molasses-based and juice-based ethanol have resulted in an increase in the blending concentrate. Coupled with the priority of lifting ethanol from B-heavy molasses and juice, this has helped the sugar factories to manage their cashflow better which has also helped in diverting more sugarcane for ethanol.

I believe this trend will continue as more players will be participating in the ethanol tender of the oil marketing companies in 2019-2020, which will result in an increase in supply.

Q: Can switching to ethanol production alleviate the financial troubles faced by the Indian sugar sector?

VJ: The industry expects to see predictability for the next 5 – 10 years for this policy, which should encourage new investments in the sector. As well as, there should be an FRP maintained at the current level, so unless both the factors come together, the improvement in the health of the Indian sugar industry will be difficult.

But I think that with these conditions in the next 3 – 4 years’ time the Indian sugar industry will come back to normal in terms of financial health.

Q: What are the prime drivers of India’s biofuel policy? Is GHG reduction a serious concern for the government of India?

VJ: The are four factors which have prompted the Indian government to announce the biofuel policy in 2018.

Firstly, the government’s commitment to GHG reduction. Secondly, the need for the reduction in the dependency on oil. Thirdly, the government has promised to double farmers’ income by 2021 – 2022. And finally, the low sugar price and the arrears of cane had become an issue due to the continuous surplus in sugar products.

I feel the biofuel policy is a part of the compliancy package undertaken by the government of India for the reduction of GHGs. While this biofuel reduction will influence the reduction of GHGs from the transport sector, the government is also promoting solar energy and the electric-vehicle policy to address the issues of reducing GHG emissions from the energy sector.

In the energy sector, the government has a fixed target of a 10% reduction of import dependency by 2022.

With these comprehensive policies surrounding GHGs, I do believe reduction is one of the concerns of the government.

Q: What would your advice be to international investors with an eye on the Indian ethanol sector?

VJ: The current biofuel policy doesn’t permit the importation of biofuels into India - the policy was created to promote the Indian ethanol industry, reduce import dependency, and help the rural economy and farmers’ income.

Similarly, exports of Indian biofuels are not permitted due to limited availability. However, there is big potential for investment in the second-generation ethanol (2G) sector.

India has a large amount of biomass available. According to the government it has between 120 – 160 million metric tonnes. Which is the equivalent of approximately 25 -30 billion litres.

Even if we assume that only 20% of this agri-biomass is used for fuel ethanol, it would amount to approximately 5 billion litres.

There is definitely an opportunity for suppliers and investors in 2G technology ethanol projects.

Find out more about the Sugar & Ethanol Asia event taking place 30 June – 2 July 2020 here.

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