Ethanol from grains could push blending plan, though ethical issues remain

Move criticised for ignoring large-scale hunger and impeding initiatives to save ground water, though it could also help solve the problem of surplus grain lying with FCI

Last month, the Union Cabinet extended a soft loan scheme for augmenting ethanol manufacturing capacity, which so far was available only for distilleries that used sugarcane as feedstock, to those that used other sources such as broken grains, maize and sorghum as their input.

The innocuous looking move could have a long-standing impact on the way the country’s grain economy has moved so far and if successful could provide an alternative to several problems associated with surplus production, excess withdrawal of ground water, etc.

However, the move has come in for criticism from several quarters on the grounds that when millions of kids go hungry in the country, allowing companies to expand their ethanol making capacities from surplus grains is not reasonable.

Their fears also stem from the fact that at the height of the Covid lockdown, the Centre had allowed the conversion of surplus rice, available with the Food Corporation of India (FCI), to ethanol for making hand sanitisers which were in big demand during that time and also for blending with petrol.

"This a clear case of converting the poor man's food into the rich man's fuel and alchohol, as normally ethanol is produced from sugarcane but to encourage it to produced from grains is wrong," said Ashish Mittal, General Secretary of the All-India Kisan Mazdoor Sabha. He said the Centre's decision has come at a time when India is fast slipping on the Global Hunger Index and is now ranked below countries such as Sri Lanka, despite producing so much food.

"Food is not a marketable surplus and is secured by governments the world over or else it will converted into fuel by companies," Mittal said.

Industry says, production of ethanol from non-sugarcane sources has been rather muted so far and according to industry sources, in the 2019-20 ethanol supply year, out of the approximate two billion litres of ethanol, a very small proportion came from non-sugarcane sources. A big constraint has been their limited capacity and the fact that not all distillers are equipped to handle both kinds of feedstock.

The decision is also expected to help make use of surplus grains, mainly rice, lying in FCI warehouses, though a very small portion of that is unfit for human consumption.

However, some experts are also of the opinion that if this indirect incentive continues for paddy and sugarcane, as there will now be alternative avenues to dispose of the surplus, then the whole question of crop diversification to protect plunging ground water levels in states where these crops are majorly grown could take a hit.

Some industry players, however, contest this saying crop diversification in the case of paddy largely involves shifting farmers to maize, which is known to consume smaller quantities of water.

Nonetheless, expansion of non-sugarcane sources of feedstock for making ethanol will form a significant part of India’s strategy to blend 20 per cent petrol with ethanol by 2030. In 2019-20, less than six per cent ethanol was blended with petrol.

What the Cabinet said

Under the soft loan scheme, the Central government gives a subvention of sic per cent if the rate of interest is 12 per cent or more and up to 50 per cent of that amount if the rate of interest is less than 12 per cent.

So far, this was available for capacity expansion of integrated and standalone distilleries that mostly used sugarcane as feedstock, but now the same has been extended to even those that surplus grains such as maize.

The scheme will be available even for those sugar mills that want to produce ethanol from both feedstocks--sugarcane and grains.

In the soft loan scheme so far, around 120 sugar mills have applied for loans for capacity expansion and a good number have already received the funds.

At present, India allows production of ethanol from both sugarcane and non-sugarcane sources that primarily include broken grains, maize and other sources.

The government has a fixed target of 10 per cent blending of fuel grade ethanol with petrol by 2022, fifteen per cent blending by 2026 and 20 per cent blending by 2030.

However, industry sources said to achieve the target of 20 per cent ethanol blending with petrol, just relying on sugarcane as a feedstock won’t be enough and the share of non-sugarcane sources in ethanol production needs to be ramped up.

But this wasn't possible as distilleries didn’t have enough capacity to make ethanol from non-sugarcane or grains.

According to some estimates, India needs about 11 billion litres of ethanol to achieve its target of 20 per cent blending by 2030. Of this, sugarcane will be able to contribute some six billion litres as there is a limit to which farm lands can be diverted towards the crop.

To make up the remaining 4-5 billion litres, the government has to rely on other sources for feedstock such as surplus rice, maize, sorghum and sugar beet.

The current production capacity of non-sugarcane-based ethanol in India is 0.25-0.30 billion litres and needs to be raised to 3-4 billion litres to meet the new requirement.

“After today’s decision, this additional capacity will get created among both, integrated and standalone distilleries, which could help meet the blending target and simultaneously create ethanol production capacities at in non-sugarcane states of Bihar, West Bengal which are surplus in rice and maize,” a senior industry official commented.

He said while using sources other sugarcane for making ethanol, plants first convert the feedstock which has a high quantity of starch in them, which is then converted into sugar and thereafter into ethanol.