India's Ethanol Policy Challenges
India's policy to increase ethanol blending faces several challenges, causing delays in implementation. Various stakeholders, including distillers, farmers, and vehicle manufacturers, are at odds with the government over proposed enhancements to ethanol-blending ratios, currently at 19%.
Key Issues and Stakeholder Concerns
- Washington's Demand: The U.S. wants India to import corn-based ethanol under a trade agreement, which is seen as potentially flooding the Indian market and increasing dependency on foreign fuel.
- Supply Challenges:
- Triveni Engineering & Industries noted that margins for converting molasses to ethanol have drastically reduced from 12-13% to 1-2%, halting new distillery projects.
- Demand Challenges:
- Toyota's Vikram Gulati highlighted that flex-fuel vehicles require additional costs for material compatibility but are taxed similarly to petrol cars, deterring production.
- Consumer Concerns:
- Consumers face higher operating costs due to ethanol's lower burning value, with E-20 blends reducing mileage by 7% and E100 by 30%.
Infrastructure and Economic Implications
- Industry Capacity:
- India's ethanol capacity is projected to run out next year, with the need for an additional 4.75 billion liters to sustain EBP20, requiring a ₹22,000 crore investment by 2030-31.
- Economic Impact:
- The program has benefited cane farmers with ₹1 trillion in payments and saved ₹1.13 trillion in foreign exchange over a decade.
Market Dynamics
- Price and Competition:
- Poor margins are attributed to New Delhi's refusal to revise ethanol prices since 2022-23, despite increased competition and rising feedstock costs.
- Government's Stand:
- The government argues that declining maize prices and byproduct sales can offset costs.
