Oil ministry says ban on use of sugarcane juice won't hit ethanol blending; experts raise concerns

The government notified sugar mills to not use sugarcane juice for ethanol production.

The decision of the government to not use sugarcane juice for ethanol production would not impact the ethanol fuel-blending programme, according to the oil ministry. However, energy experts have expressed doubts.

On December 7, the central government notified sugar mills to not use sugarcane juice for ethanol production in ESY (ethanol supply year) 2023-2024, which began this month.

According to a CNBC-TV18 report, Pankaj Jain, Secretary, Ministry of Petroleum and Natural Gas (MoPNG), said the government was committed to the ethanol blending programme and plans to achieve 15 percent ethanol blending in petrol in 2023-24. Jain said 20 percent ethanol blending would be achieved by FY25-26, reported CNBC-TV18.

However, energy experts believe that restriction on ethanol production using sugarcane juice would affect blending targets as infrastructure for ethanol production using other raw materials is not quite developed in the country.

“We expect ethanol production to decline 20 percent in 2023-24 due to the recent government announcement. At the same time, petrol consumption is likely to increase by 5 percent. This is likely to take ethanol blending below 10 percent in 2023-24 vs ~12 percent in 2022-23,” said Pushan Sharma, Director, Research, CRISIL Market Intelligence and Analytics.

Since India is largely dependent on imports for its crude oil requirements, the government is pushing for blending of ethanol — which is produced locally — in petrol. The government aims to achieve 20 percent blending by 2025, ahead of its previous target of 2030, compared to 12 percent at present.

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The decision to curb the use of sugarcane for ethanol production comes as domestic prices of sugar have remained elevated, up about 5 percent in December this year compared with last year.

Below-normal showers in the top cane-growing districts in the western state of Maharashtra and the southern state of Karnataka, both of which account for more than half of India’s total sugar output, have been a cause of worry for the government.

India, the world's second-largest sugar producer and a major exporter in recent years, has been using more and more of the country’s sugarcane crop to make ethanol.

"Last year, despite a good monsoon, sugar production fell. This year, with El Nino, we cannot risk the country's food security. The step has been taken to ensure that this commodity is not used for anything other than consumption by people," a government official said.

Asked if there is a proposal to reduce ethanol production, the official added, "we are not considering this. Ethanol can be produced from other sources such as C-heavy and from grains such as maize and wheat." C-heavy molasses is a cane by-product that has hardly any sugar left in it.

However, experts pointed out that ethanol production using grains such as wheat, maize and other agricultural waste is not yet fully developed in the country.

“There are several raw materials such as starch, maize, etc., for ethanol production, but right now the ecosystem to switch from sugar to these alternative products is lacking. The supply chain for that is also not established. Even if we have to make the switch, it is going to take some time to set up the supply chain,” said Probal Sen, Energy Analyst, ICICI Securities.

Though ethanol can be produced from several other sources such as corn, rice, and barley, sugarcane and its by-products, such as B molasses, remain the major source of ethanol production in India.

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Crisil, a credit rating agency, said currently around 65 percent of the country’s ethanol is produced using B heavy molasses, 25 percent by cane juice, and 4 percent each using rice and maize.

“India does have the infrastructure to produce ethanol through grains, but the contribution of grains in ethanol production has remained less than 10 percent. CRISIL expects more ethanol to be produced through the B heavy route this year, which is likely to increase sugar production by 2-2.5 MMT,” said Sharma.