India's ethanol industry is currently going through a huge crisis. There is a serious problem of excessive supply i.e. oversupply of ethanol in the country. The situation is such that the manufacturers have accumulated about 7 billion liters i.e. 700 crore liters of unused excess ethanol, to utilize which they are running from pillar to post in search of new buyers and alternative markets. After all, what happened suddenly in the country that there was such a huge pile of ethanol? Let us know its complete story.
Why did the crisis of oversupply of ethanol arise?
According to experts, in the last few years, the government had rapidly promoted fuel blending (mixing ethanol in fuel) to reduce the country's dependence on crude oil imports. Due to this government incentive, the capacity to produce ethanol in the country expanded tremendously. This expansion has so far outstripped domestic demand that ethanol producers are now forced to operate at levels far below their capacity.
At present, the total ethanol production capacity of the country has reached about 20 billion liters and industry experts estimate that it will increase by another 4 billion liters this year. On the other hand, the country's 'E20 fuel blending program' requires only 11 billion liters of ethanol annually. Apart from this, 3 to 3.5 billion liters are consumed in non-fuel sectors like liquor, pharmaceuticals and chemicals. Even after adding these two, about 7 billion liters of ethanol is left for which there is no clear buyer or demand in the market. Because of this, distilleries are able to operate at barely 60 percent of their capacity. An additional supply of 2.77 billion liters has been estimated in Maharashtra alone.
Changes in government planning and price mathematics
Meanwhile, the government has also made some changes in its strategy. In view of some dissatisfaction from customers regarding E20 fuel, the government has currently put on hold plans to implement high flexi-fuel blends like E25 or E30. Under the current roadmap, work will continue only on E20 instead of E25 or E30 till October 31, 2026.
Ravindra Utgikar, Chief Sales Officer of 'Willow India', a company that supplies machinery to ethanol manufacturing companies, says that instead of making the same type of blend mandatory for all vehicles, we should work on a policy of setting different prices for different blends (like E10, E20, E85). This model is already quite successful in America and Brazil. This gives drivers the freedom to choose fuel according to the age and technology of their vehicle.
Talks with Nepal and new plan to mix it with diesel
New options are now being considered to deal with this huge surplus. Exports of first-generation ethanol are still banned in the country, although small quantities of non-fuel ethanol are sent to Tanzania, Angola and Kenya. Additionally, the Grain Ethanol Manufacturers Association (GEMA) is in talks with Nepal as it is also planning to make 10 per cent blending mandatory, although there is a shortage of distillery capacity there.
On the other hand, the government and industry are now working on the possibilities of mixing ethanol with diesel also. According to Ashish Gaikwad, Managing Director of Praj Industries, his company's 'Bio-Isobutanol Technology' is absolutely ready for commercial production. Since the consumption of diesel in India is much higher than that of petrol, even a small two percent blending of it in diesel can prove to be a major milestone in the country's biofuel journey and will open the way for new projects worth thousands of crores of rupees. Apart from this, its demand also remains constant in sectors like alcohol and pharmaceuticals.