Ethanol: In search of a policy blend

Ethanol: In search of a policy blend

India, which currently imports around 80 per cent of its crude oil to meet its growing energy needs, has also moved to develop its second generation ethanol industry. The government had in 2008 proposed an ambitious target of 20 per cent ethanol blending with petrol by 2017.

However, today the blending levels with petrol are less than 3 per cent, compelled by shortages in ethanol availability set against increasing demand from the chemical and beverage industries. International players like Denmark-headquartered Novozymes have played a key role in second generation ethanol development.

G S Krishnan, Managing Director of Novozymes South Asia, tells Ravi Menon of Deccan Herald that second generation alternatives to molasses-based ethanol and a uniform pricing policy is vital to the success of the government’s ethanol blending programme.

Excerpts:

There have been impediments in the way of achieving the 5 per cent blending with petrol prescribed under the ethanol blending program. How is the industry striving to overcome these impediments?

While the Indian government has set a long term ambitious target of achieving 20 per cent blending targets by 2017, currently it is not even able to achieve 5 per cent of the ethanol blending. This couldn’t be achieved mainly due to shortage in availability of ethanol for oil companies as per their requirements.

The shortage is primarily due to two factors from our point of view – firstly, demand from the chemical and beverage industry for ethanol has been increasing; and secondly, first generation ethanol which is predominantly produced from molasses in India is dependent on sugarcane crop, which in turn is dependent on good monsoons.

To overcome these challenges, the alternative to ethanol from molasses will be second generation ethanol which is produced from agricultural residues.

Pricing and procurement issues still hamper the ethanol blending program. It’s over seven years since the government launched it. How have you taken up these issues?

First generation ethanol is dependent on the sugarcane crop. Even if the current production of ethanol can satisfy the blending mandate to a certain level, in order to increase it beyond 5 per cent, we need to look at further alternatives to fossil fuel. This can be achieved only by adopting second generation ethanol primarily from agricultural residues.

We as a company have been playing a proactive role in propagating the new technology used in the conversion of agricultural residues to ethanol. Department of Biotechnology and CSIR-sponsored projects at various institutes in India have been working on second generation ethanol. Some of these projects have translated into pilot facilities and companies like Praj Industries have already announced their plans for setting up the demonstration plants. Industry is very much looking forward to the success of second generation ethanol.

Why is the price of ethanol unduly dependent on demand from the chemical and alcohol industries?

Industry would be in a better position to comment on the pricing policy. In our organization we are primarily into production of enzymes which are sustainable solutions. and are continuously innovating to ensure enzymes which play a vital role for conversion of cellulosic material from agricultural residues into sugars and in turn into ethanol. We have also been successful in bringing down the cost of enzyme consumption in second generation considerably by optimising the usage of enzymes while working closely with our partners. There is already considerable interest in this technology from some companies in India.

Blending at the rate of 5 per cent will require 1,050 million litres of ethanol annually. But the OMCs (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have procured only 400 million litres since January 2013.

Producing second generation ethanol from agricultural residue will be the answer to ensure steady availability of ethanol. This has the potential to change the demand and supply equation.

This situation can only change if the government comes out with proactive initiatives to support this new technology along with implementing uniform policies across states as well as ensuring availability of feedstock for production of second generation ethanol. It is also imperative to incentivize farmers for the collection of biomass.

At the national level, only 2 to 2.5 per cent blending is happening against a target of 5 per cent. In certain states it is about 10 per cent, but in several states it is not even 5 per cent. How can this imbalance be corrected?

Variation in different states is primarily related to the availability of ethanol in that particular state. This imbalance will continue to be there as the availability of ethanol is basically dependent on sugarcane producing states. Also cross-border taxes makes it difficult for surplus ethanol available in some states to be sold in neighbouring states.

What changes would you suggest the government make in the ethanol tendering process? There have been allegations by companies like Indian Glycol and Easter India Chemicals that sugar mills are manipulating the bidding process in violation of the Competition Act of 2002.

Unfortunately, we don’t have any purview to this. However, in order to avoid challenges between various sectors using ethanol, it is vital for the government to look at alternative source of ethanol and have uniform policies related to ethanol across states.

Does Novozymes plan to set up a bio-based ethanol manufacturing facility in India? What is your capex for the upcoming fiscal?

Novozymes is an industrial enzyme producer and we will support any second generation facility which should come up. We don’t have plans of setting up a plant in India on our own.

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