Ethanol Blended Petrol Programme

Ethanol, an anhydrous ethyl alcohol having chemical formula of C₂H₅OH, can be produced from sugarcane, maize, wheat, etc  which are having high starch content. In India, ethanol is mainly produced from sugarcane molasses by fermentation process. Ethanol can be mixed with gasoline to form different blends. As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions and thereby reducing the occurrence of environmental pollution. Since ethanol is produced from plants that harness the power of the sun, ethanol is also considered as renewable fuel.

Ethanol Blended Petrol (EBP) programme was launched in January, 2003. The programme sought to promote the use of alternative and environment friendly fuels and to reduce import dependency for energy requirements.

Implementation of EBP programme

During 2001, pilot projects on Ethanol Blended Petrol started at 3 locations i.e. at Miraj, Manmad (Maharashtra) and Aonla/Bareilly in Uttar Pradesh. The Government of India decided to launch Ethanol Blended Petrol (EBP) Programme in January, 2003 for supply of 5% ethanol blended Petrol. Subsequent to this, Ethanol Blended Petrol programme was launched in January, 2003 in 9 States i.e. Maharashtra, Gujarat, Goa, Uttar Pradesh, Haryana, Punjab, Karnataka, Andhra Pradesh, Tamil Nadu and 4 Union Territories.

The Ministry of Petroleum & Natural Gas (MoP&NG) vide its notification dated 20th September, 2006 directed the Oil Marketing Companies (OMCs) to sell 5% Ethanol Blended Petrol subject to commercial viability as per Bureau of Indian Standards specifications in notified 20 States and 4 UTs with effect from 1st November, 2006. The additional  10 States included Delhi, Himachal Pradesh, Madhya Pradesh, Chandigarh, Kerala, Rajasthan, West Bengal, Odisha, Bihar and Jharkhand. However, North - Eastern States, J&K, Andaman & Nicobar islands and Lakshadweep Islands have not been covered under the programme.

This programme has been extended to whole of India except Union Territories of Andaman Nicobar and Lakshadweep islands with effect from 01st April, 2019 wherein OMCs sell petrol blended with ethanol up to 10%.

The Government had 10% blending target for mixing ethanol with petrol by 2022 & 20% blending target by 2030.  Government decided to advance the target of 20% ethanol blending in petrol from 2030 to ESY 2025-26. To achieve the target of 20% ethanol blending by 2025, approximately 1,016 crore litres of ethanol will be required. The total demand for ethanol, including other uses, is estimated to be around 1,350 crore litres. To meet this requirement, an ethanol production capacity of about 1,700 crore litres must be established by 2025, assuming the plants operate at 80% efficiency. 

Procurement of ethanol

The OMCs are to procure ethanol from domestic sources. Government has notified administered  price of ethanol since 2014. 

The blending of ethanol with petrol increased from 38 crore litres in Ethanol Supply Year (ESY) 2013-14 to 500 crore litres in ESY 2022-23 with corresponding increase in blending percentage from 1.53% to 12.06%. In the ESY 2023-24, the blending percentage surpassed 13% with approximately 545.05 crore litres of ethanol blended as of August 31, 2024. This remarkable progress underscores a significant increase in the overall ethanol blending percentage, rising from 1.53% in 2014 to an impressive 15% in 2024.

As large quantity of ethanol is available right from the beginning of sugar season due to conversion of sugarcane juice and B heavy molasses to ethanol, it has been decided to redefine Ethanol Supply Year as a period of ethanol supply from 1st November of a year to 31st October of the following year from 1st November, 2023 onwards. 

Over the past decade, this initiative has delivered significant benefits, including savings of Rs 1,06,072 crore in foreign exchange, a reduction of CO₂ emissions by 544 lakh metric tons, and a substitution of 181 lakh metric tons of crude oil. Furthermore, the program has had a considerable economic impact, with OMCs disbursing Rs 1,45,930 crore to distillers and Rs 87,558 crore to farmers.

Revision of ethanol price for the Ethanol Blended Petrol (EBP) Programme for the forthcoming sugar season 2022-23 during ESY 2022-23 from 1st December 2022 to 31st October, 2023. 

• The price of ethanol from C heavy molasses route be increased from Rs.46.66 per litre to Rs.49.41 per litre
• The price of ethanol from B heavy molasses route be increased from Rs.59.08 per litre to Rs.60.73 per litre,
• The price of ethanol from sugarcane juice/sugar/sugar syrup route be increased from Rs.63.45 per litre to Rs.65.61 per litre,
• Additionally, GST and transportation charges will also be payable.  OMCs have been advised to fix realistic transportation charges so that long distance transportation of ethanol is not disincentivised

Government has reduced the GST rate on ethanol meant for EBP Programme from 18% to 5%.

OMCs are advised to continue according priority of ethanol from 1) sugarcane juice/sugar/sugar syrup, 2) B heavy molasses 3) C heavy molasses and 4) Damaged Food grains/other sources, in that order.

Subsequent to amendment in Industries (Development & Regulation) Act, 1951, giving control on production, movement and storage of ethanol to the Central Government, Central Government has been regularly interacting with the State Governments and other stakeholders to resolve the bottlenecks in smooth implementation of EBP Programme.

Department of Food & Public Distribution has introduced a Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity. This Scheme aims to infuse Rs. 1332 crore via Interest Subvention route. With a view to increase existing capacities further, DFPD has notified modified interest subvention scheme on 14.01.2021 for setting up new grain based distilleries/ expansion of existing grain based distilleries, dual feed distilleries & molasses based distilleries to produce ethanol & production of ethanol from other 1G feed stocks. 

Use of Food Corporation of India rice and maize stocks for production of ethanol

To increase production of fuel grade ethanol and to achieve blending targets, the Govt of India has allowed use of maize and rice with FCI for production of ethanol. Government has declared that rice available with FCI would continue to be made available to distilleries in coming years. The extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers; and thus will also increase the income of crores of farmers across the country.

Government has fixed price of ethanol from maize as Rs 51.55/litre & rice available with FCI as Rs 56.87/litre for ethanol supply year 2020-21. For FY 2020-21, Government has fixed the price of FCI rice to Rs 2000/quintal for production of ethanol. For FY 2021-22, Government has decided to continue the price of FCI rice to Rs 2000/quintal for production of ethanol. This will give confidence to industry about the stability in raw material price and its availability. For the purpose of supply of surplus rice for the production of ethanol, distilleries are at liberty to choose the nearest FCI depot as per requirement/logistics.

Source : Ministry of Petroleum and Natural Gas