Future Of Ethanol Is In Grain

Aditi Pasari
01 Jan 2024
02:04 PM
4 Min Read

The declining production of sugar has opened the opportunity for diversifying sources of ethanol production and grain-based ethanol production has become more viable.

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Grain based ethanol processing has emerged as the primary choice for the Agri-industrialists across India and they have understandably reacted enthusiastically to its enormous potential. The primary reason for the emergence and dependence on grain-based ethanol can be attributed to the overburdened fossil fuel reserves and their unsustainability. Fossil fuels contribute to carbon dioxide emissions that cause greenhouse effect and air pollution. Thus, major economies around the world, in the last couple of decades, have been developing green, environmentally friendly, and sustainable bioenergy via grain-based ethanol as an alternative to the traditional fossil fuels. Among the major economies, except India, Brazil, and Australia (these nations mainly produce ethanol via sugarcane), developed economies like USA, China, European Union, Canada, and Russia among others use grains like maize, wheat, and barley to produce grain ethanol. India’s grain ethanol is less than the sugarcane-based ethanol, however, in the last few years, the grain-based ethanol is gaining prominence in the renewable energy market.

There are two factors for this development. First, grain-based processing has a much larger headroom for expansion, as the NITI Aayog has projected a 482-crore litre increase in production capacity by 2025 for the grain-based distillation. Second, the primary component of molasses, i.e., sugarcane, has a yield of 84 metric tonnes per hectare nationwide, as in 2021 after growing by merely 2 metric tonnes per hectare and growth rate being predicted to be static for the foreseeable future, grain-based ethanol has emerged as preeminent renewable energy source. Over the past couple of years, there has been a decline in the harvest of sugarcane due to heat waves in the northern part of India and the prevalence of an erratic monsoon season that affected the sugar production and eventually sugar-based ethanol. This declining production of sugar has opened the opportunity for diversifying sources of ethanol production and grain-based ethanol production has become more viable.

Why Grain Based Ethanol

Grain based ethanol production has turned out to be an alternative to traditional ethanol production from sugarcane. Niti Aayog has confirmed that 7.6 billion litres of production capacity will be required with sugarcane-based distilleries and the remaining 7.4 billion litres will have to be with grain-based distilleries because surplus sugarcane can only be diverted up to a certain limit. India's ability to produce ethanol from molasses-based distilleries was 426 crore litres in 2021, compared to 258 crore litres from grain-based distilleries. This implies that India must concentrate on both the total amount of ethanol produced and its production capacity in order to meet its ambitious 2025 E20 fuel target. Thus, grain-based ethanol production has provisioned the diversification of feedstocks, i.e., reducing the dependence on a single crop and further strengthening the sustainable goals. Grain-based ethanol production also helps in the economic development of the region where the production level is high and the region-specific crops and their plantation can add to the income of the farmers and growth of the industry in the region.

Grain-based-ethanol Industry and its concerns

Some major concerns that the Grain Ethanol Manufacturers of India have expressed are related to the difficulties faced by the Dedicated Ethanol Plants (DEPs). It is important to note that these DEPs were established by various business owners from across India to support the Government of India's ambitious plan to complete the E-20 EBPP by 2025–2026. Another important point to be noted is that the Ministry of Environment & Forests (MOEF) has granted licences to all DEPs that are only limited to grain ethanol; and these DEPs are not permitted to produce any other goods. The Grain Ethanol Manufacturers of India, feel that the skyrocketing prices of DFG (Damaged Food Grain) and maize, were unmanageable after the feedstock supply was stopped at a certain rate. This resulted in immense pressure on the costs of the grain ethanol that DEPs produced. OMCs have graciously revised the price by offering interim relief for supply in the remaining Q4 of ESY’ 22–23, considering the feedstock status.

Several grain-based ethanol firms and organisations have periodically given OMCs access to the Cost Sheet, which is based on an open feedstock pricing and availability; the DEP’s feel no corrective action has been taken so far. Grain Ethanol Manufacturers of India is calling for prompt government intervention and the required price adjustments to protect the grain ethanol producing plants. In addition, the ethanol-producing plants that rely on maize and DFGs are now inefficient and may close if the government does not act swiftly due to their high procurement costs.

The Grain Ethanol Manufacturers of India are concerned about the ability of the grain DEPs to supply the contracted 290+Cr litres during ESY’23–24 considering the current situation. The DEPs may now complete their commitment to assist the government's biofuel policy because OMCs thoroughly reviewed the costing and updated the purchase price. Grain Ethanol Manufacturers of India insist that 40% of the whole grain needs be allocated to DEPs at a set price, as was initially intended by the government through the FCI to ensure continuous supply.

A number of Grain Ethanol Manufacturers of India members have set up their units in distant areas including the Northeast, Tamil Nadu, and Jammu & Kashmir as a result of Ministry of Petroleum and Natural Gas (MOPNG's) vigorous advocacy for the creation of grain DEPs around the country. The assurance that FCI rice would be provided to these establishments at a set cost suitable for their capacity allowed them to operate. Oddly enough, these States import grain from other states, which makes them unviable, because they are currently unable to produce enough grain to meet the needs of these units. There is little doubt that within three to four years the development of the grain crop will be the outcome of the efforts of all pertinent agencies. They need continuous special help in the form of a fixed price grain supply.

Grain Ethanol Manufacturers of India demand that Grain-based ethanol's price mechanism needs to be approached differently from sugar cane-based ethanol. While the price of grain fluctuates from hour to hour and day to day, the price of sugarcane, the feedstock used to produce ethanol, is set at the start of the season. Grain DEPs are forced to create ethanol and only ethanol in order to supply OMCs, while sugarcane-based ethanol units can choose to produce sugar or ethanol, depending on which is more feasible or profitable for them.

NB: Aditi Pasari is Chairperson of PHDCCI National Task Force on Ethanol & Biofuel & Joint Managing Director, Gulshan Polyols. Views expressed are personal. 

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