Ethanol fuel blending on course to meet govt's target of 12%; distilleries hope to keep up momentum after another rate hike

The government is targeting for 12 per cent blending of ethanol with petrol for the 2022-23 ethanol supply year, ending November. Oil marketing companies (OMCs) procure a large quantity of ethanol from several industry players. 

Ethanol, which is being produced from rice and maize, reduces carbon emissions and helps in removing the carbon equivalent of 12 million cars from the road each year.

In order to accelerate the adoption of the blending of ethanol with petrol as fuel for automobiles, the government has for the second time hiked its price to offset the higher cost of damaged grains within 15 days. Notably, the price of damaged grain has surged by Rs 4-5 per kg in the last month ever since the Food Corporation of India (FCI) stopped the supply of subsidised rice to distilleries. 

Speaking on the latest move by OMCs to hike ethanol price, Rajinder Mittal, MD of BCL Industries, said that the price hike was necessary to incentivise distilleries and keep up with the momentum of ethanol blending.

Many distilleries had stopped operation in July after the FCI stopped the supply of subsidised rice. This prompted the government to go for mid-season price revision as it sensed that any impact on ethanol production could derail its target of ethanol blending. .

Mittal said that BCL is the "move is encouraging for ethanol makers. The latest round of rate hike will benefit the industry players".

BCL is one of the largest grain-based manufacturers of Extra Neutral Alcohol (ENA) and ethanol in India. 

On the use of maize for ethanol, he said that maize is today used as an input for ethanol production globally, but it was not happening in India somehow. 

"The government is now encouraging maize. The price hike of ethanol from maize will contribute to profitability going ahead," he said. 

Meanwhile, sugar industry body ISMA has sought GST rate of 5 per cent for vehicles using flex fuels, same as that on electric vehicles. This move, it said, will directly contribute to reducing India's fuel bill while simultaneously curbing carbon emissions from the transportation sector.

The development assumes significance as it comes in the backdrop of Prime Minister Narendra Modi’s vision and the road map of Ethanol Blending Program (EBP) that sets a target to achieve 20 per cent blending in petrol by 2025.