ETHANOL ADVANTAGE

Removing quantitative and feedstock restrictions on ethanol production will benefit sugar mills, and higher ethanol prices would further amplify these gains

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The spotlight is on India's ethanol sector, as the government has allowed sugar mills to decide which feedstock to use for the 2025-26 Ethanol Supply Year (November-October).

Mills can produce ethanol from sugar, sugarcane juice, sugar syrup, or B-heavy and C-heavy molasses without any restrictions on quantity.

For India, ethanol blending is turning out to be a key pillar of its energy security strategy. With 85% of its crude oil requirement being imported, higher ethanol use for blending helps reduce import dependency. To point out, any jump in crude oil prices leads to a surge in the import bill, with secondary impacts in the form of a weakening of the Indian Rupee, leading to higher inflation. Ethanol blending is all about insulating India's macro parameters.

But are the gains of ethanol blending visible? In 2014, ethanol blending was merely 1.53%. Today it has reached 20%. Over the past 11 years, ethanol procurement has enabled ₹1.21 lakh crore in income for farmers, reduced crude imports by 23.86 million metric tonnes (MT), and saved ₹1.40 lakh crore in foreign exchange for the country. Most importantly, India has achieved the 20% ethanol blending target five years ahead of the original 2030 schedule.

The mandate of blending petrol with 20% ethanol is here to stay, and in the medium to long term, the blending rate is only going to increase. This is an opportunity for all the parties involved, especially distilleries. India's sugar mills and distilleries like Bajaj Hindusthan Sugar, Balrampur Chini Mills, Shree Renuka Sugars, Praj Industries, and CIAN Agro have been large players involved in ethanol production in the last few years.

Currently, ethanol is produced from first-generation feedstock like sugarcane and grains (maize and damaged rice and wheat). Ethanol can also be produced from second-generation feedstock like bagasse, bamboo, rice husk, wheat straw, and even grass. The latter is in a nascent stage in India.