Ethanol blending in India has reached more than 7.2 per cent — the first time it has reached this level — in the first four months of the ethanol supply year 2020-21 (December to November), putting the country on course to meet the target of 10 per cent blending by 2022.
According to industry sources, if oil-marketing companies (OMCs) lift the ethanol they had contracted for, in the next few months all-India average blending could be even near 8 per cent by the time the season ends in November. So far, the best ever ethanol blend with petrol has been around 5.2 per cent at all-India level.
In states such as Goa, Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Haryana, Punjab, Delhi, Uttarakhand, and Himachal Pradesh (and Daman and Diu, a Union Territory), 9.5-10 per cent ethanol is being blended with petrol. This means these states are close to the 2022 target.
But, it hasn’t been all smooth so far. Sugar industry players say blending could have been more in the first four months of the 2020-21 season but for some strategic errors by OMCs in estimating the storage capacity. Owing to this, mills are being compelled to supply ethanol to depots far from their production units.
The data from industry sources says till March 29, OMCs have asked for 4.57 billion litres for 2020-21. Of this, sugar companies have finalised bids for 3.25 billion litres. Against this, around 2.98 billion litres of ethanol has been contracted. Of this 1 billion litres (around 33.5 per cent) has been supplied, while the rest is in the process of being delivered. Around 770 million litres has been produced from B-heavy molasses and sugarcane juice, which will lead to a shortfall of 800,000 tonnes of surplus sugar. Industry players say in 2020-21 there will be a decline in production of around 2 million tonnes of sugar because of this diversion of sugarcane for ethanol.
According to the ethanol policy, sugar companies are under obligation to deliver the contracted ethanol to the nearest OMC depot, for which OMCs are supposed to pay the transportation charges. However, sugar companies say OMCs do not do the full reimbursement because the base rate was fixed in October last year (before the current spurt in fuel prices). This is why sugar companies have to bear an additional burden of Rs 3-5 per litre. Diesel rates have gone up by more than 25 per cent since October. Sugar companies want the base rate revised. The Indian Sugar Mills Association (ISMA) has suggested that if the OMCs feel that the transportation rates cannot be revised, then they could enter into contracts with transporters (as is done in the case of petrol).
The problem of reimbursement has also become acute because in several cases OMCs have changed the ethanol delivery depot early in the season because the ones preferred by sugar companies near their plants aren’t empty. The relocated depots are situated in states which have just initiated the blending programme and therefore they don’t have the adequate infrastructure to handle ethanol.
This has pushed up the turnaround time of tankers containing ethanol from one-two days to 15-20 days.
“We (the sugar industry) could have easily supplied even more ethanol than has been done so far had there been no mistake in estimation in some of the depots by OMCs,” said Abinash Verma, director general of ISMA.
Sources say in some cases distilleries are being forced to run on much lower capacity because the downstream supply chain is clogged.