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Background: The Ethanol Push
India’s energy demand has steadily risen with the growing population and urbanisation. During the inauguration of India Energy Week 2023, Prime Minister Narendra Modi highlighted that the country’s energy consumption is projected to increase to 11% of global demand in the near future, in contrast to the current consumption rate of 5%. At the same time, India is also heavily dependent on imports to meet its energy requirements. Currently, India imports around 80% of its oil requirement. Additionally, fossil fuels make up roughly 75% of India’s energy demand, while the remaining share is met by biofuels such as agricultural by-products. Consequently, policymakers view the utilisation of biofuels as an opportunity to decrease the country’s reliance on imported fossil fuels strategically.
Ethanol, a critical biofuel, is primarily derived from the fermentation of sugars using yeasts or through petrochemical procedures such as ethylene hydration and is mainly derived from rice, corn, and sugar. Since ethanol is obtained from agricultural byproducts rich in sugar and starch, it also serves as an additional utilisation of these resources, thereby augmenting the income of farmers’ income and being a cleaner alternative to fossil fuels.
In a bid to minimise dependence on imported fossil fuels, India has outlined its intention to promote the use of ethanol. In 2003, the Government of India launched the Ethanol Blended Petrol (EBP) Programme to mix ethanol with petrol to reduce the consumption of fossil fuels. The EBP programme, when it was launched, directed the oil marketing companies to sell 5% EBP (Ethanol 5%, Petrol 95%). Currently, ethanol accounts for about 10% of the mix. The National Policy on Biofuels – 2018 envisaged an indicative target of 20% blending of ethanol in petrol by 2030 under the Ethanol Blended Petrol (EBP) Programme. Subsequently, in 2022, the National Policy on Biofuels – 2018 was amended by the Union Cabinet to advance the date fuel companies have to increase the percentage of ethanol in petrol to 20% from 2030 to 2025.
According to the ethanol blending roadmap published by NITI Aayog, India imported 185 million metric tons of petroleum in 2021-22, costing $55 billion. Since a significant portion of this petroleum is used for transportation, achieving the 20% ethanol blending goal could save around Rs 30,000 crore in foreign exchange annually. The target for ethanol blending is expected to drive investments in capacity expansion and the establishment of new distilleries. To reach the target of blending 20% ethanol in petrol, it will be necessary to increase the existing combined alcohol/ethanol distillation capacity of 684 crore litres. The Department of Food and Public Distribution is actively promoting the establishment of new industries by encouraging states and investors to ensure an ample supply of ethanol for blending. The PM JI-VAN scheme facilitates the setup of plants and biorefineries in regions with abundant biomass resources, aiming to ensure the availability of ethanol for blending nationwide. These policies are projected to generate employment opportunities in rural areas and contribute to the growth of the agricultural economy.
The production of sugarcane and the stock of sugar has been growing every year. This excess stock affects the liquidity of sugar mills, resulting in delayed payments to sugarcane farmers. However, with the EBP programme, the surplus sugar can now be diverted to ethanol production, creating a consistent demand for ethanol and injecting liquidity into the sugarcane industry. Thus, EBP also helps reduce the accumulated arrears and enables timely compensation for cane farmers.
The Government of India, with an emphasis on ethanol as a fuel, aims to augment India’s energy security, curtail dependence on imported fuel, conserve foreign exchange reserves, address environmental concerns, and provide impetus to the domestic agricultural industry. However, specific issues are associated with the push for ethanol as a fuel in India.
Problems Associated with the Push for Ethanol
Food Security Concerns
To achieve its goal of blending 20% ethanol in petrol by 2025, India needs to cultivate more feedstock on additional land. If domestic production does not rise, meeting the ethanol blending targets will require an increase in imports, which goes against the goal of energy security that the push for ethanol as a fuel aims to achieve.
The government uses food grains from the central pool stocks to produce ethanol-blended petrol. These food grains are procured from farmers at Minimum Support Prices and are initially intended for distribution under different schemes to assist impoverished and vulnerable groups. However, utilising these food grains for ethanol production diverts them away from those most in need, worsening the country’s hunger situation. It is worth noting that India ranked 107th out of 121 countries in the 2022 Global Hunger Index, indicating the distressing state of the country’s hunger situation.
NITI Aayog’s roadmap for ethanol blending, published in 2021, emphasises using food-based feedstocks to achieve the new blending target. This represents a shift from the 2018 National Policy on Biofuels, which prioritised biofuel production using waste biomass.
The roadmap also asserts that the surplus foodgrain production will be adequate to meet the ethanol blending target. However, reliance on excess stocks is a short-term solution, especially during droughts or when agricultural production is affected by climate change.
Hidden Environmental Costs
Ethanol-based biofuels are considered a better alternative to fossil fuels because of their lower emissions. Studies suggest that burning ethanol produces fewer carbon dioxide emissions than conventional fuels. However, this calculation does not consider the greenhouse gas emissions associated with ethanol production. A recent US study found that ethanol’s carbon intensity may be around 20% higher than that of petrol, owing to emissions resulting from land-use changes, increased fertiliser use, and harm to ecosystems.
As previously mentioned, the roadmap for ethanol blending neglects certain parts of India’s biofuels program that had prioritised using agricultural waste instead of food crops. Recent data indicates that financial incentives for ethanol blending are encouraging an increase in sugarcane cultivation, which is a crop that consumes a lot of water. As per a report by the government, producing one kilogram of sugar requires 1,500-2,000 litres of water. Therefore, the current programs for ethanol-blended biofuels go against India’s efforts to shift to more environmentally sustainable fuels.
Conclusion: Managing Different, Sometimes Conflicting Goals
In developing nations, there is often a conflict between different objectives due to the complex and multifaceted issues they face. For example, climate change is a global issue that affects all countries. However, developing countries are more susceptible to its impact due to their dependence on natural resources and limited capacity and access to technology to adapt. At the same time, addressing climate change may impede progress towards other developmental goals, such as economic expansion, addressing food security, and poverty alleviation.
India’s objective to reduce energy dependence and fulfil climate commitments may be hindered by the 20% ethanol blending target, which could cause more harm than good. The government’s ethanol mandate is increasing focus more and more on the use of food crops, which is a deviation from its National Policy on Biofuel. As discussed, the current policy direction could lead to unsustainable land-use practices that adversely affect food security, water security, and net emissions.
To navigate these complex challenges, developing nations must adopt a holistic and coordinated approach to development that recognises the interconnectedness of various objectives. To achieve a sustainable transition to biofuel, for instance, the government should prioritise a move towards wastes and algal biomass for biofuel production. Such an approach, while addressing the challenge of energy dependence, would also consider food security and net emissions.