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New Delhi: In a significant push toward energy self-sufficiency, India is gearing up to enhance its ethanol production to achieve a 20% blending rate in petrol by the Ethanol Supply Year (ESY) 2025, necessitating an annual production of approximately 990 crore liters. To meet this ambitious target, the country is set to optimize the use of both grain and sugarcane feedstocks.
The move comes as part of a dual strategy to ramp up ethanol output using grains and sugarcane, with annual ethanol production from grains expected to jump to around 600 crore liters by the next season, up from this season’s 380 crore liters. Sugarcane will complement this supply, as indicated by CRISIL Ratings, which has highlighted the substantial processing capacity available for ethanol production from sugarcane.
This strategic use of both feedstocks is poised to help manage the sugar inventories effectively, particularly in light of the high carry-over stocks anticipated at the end of the current season due to regulatory limits on ethanol production and sugar exports.
India’s drive to increase ethanol blending has been marked by a steady rise in the blending rate, which has increased by 200-300 basis points each season since ESY 2021. Despite last year’s erratic rainfall impacting sugarcane production, ethanol output from this route is expected to be around 250 crore liters for the season.
Poonam Upadhyay, Director, CRISIL Ratings, noted, “With the grain-based ethanol production seeing a 40% capacity expansion, we anticipate the ethanol blending rate could reach 14% in ESY 2024, helping offset some of the shortages from the sugarcane route.”
The government’s careful regulation of sugarcane for ethanol production, based on the sugar demand-supply projections for the year ahead, plays a critical role in balancing the market dynamics. Anil More, Associate Director at CRISIL Ratings, added that allocating sugarcane for ethanol production not only aids in managing sugar inventory but also enhances the financial health of sugar mills, ensuring timely payments to cane farmers.
As India continues to focus on reducing its dependency on crude oil imports through increased ethanol blending, the policies for the next season and the pricing and availability of grain-based feedstocks will be crucial to watch.
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