Economics Enviornment

Switch to ethanol production, Gadkari tells sugar mill owners

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In News

  • Union Transport Minister Nitin Gadkari, has urged sugar mills to switch to producing ethanol, as it would prove beneficial for tackling the problems stemming from surplus production and falling prices.
  • He also warned the mills that if they did not switch to producing ethanol, they would risk becoming dysfunctional.



  • Sugar mills are not in a good shape and are struggling.
  • Uncompetitive prices: In Brazil, the price of sugar is Rs 22 per kg while in India, it is fixed at Rs 32-34 per kg. Hence in the world market, Indian sugar is very uncompetitive and it leads to significant losses.
  • Delayed payments: Moreover, the perennial delay in granting the subsidies further aggravates the problem.
  • Slow permissions: Maharashtra has been slow in giving permission to sugar factories for converting sugar cane juice to ethanol and B-class molasses to ethanol. As a result, a number of sugar factories have not been able to make the switch.
  • Surplus production: Surplus production of sugar is a major problem. However, it is not possible to reduce it, and it is also hard to change crop patterns.



In focus: Ethanol Blending


  • The use of ethanol as an automobile fuel is as old as the invention of the internal combustion engine itself.
  • It has been used in cars since Henry Ford designed his 1908 Model T to operate on alcohol.
  • Brazil has been using this fuel since 1920s.


  • Ethanol, can be produced from sugarcane, maize, wheat, etc  which have high starch content.
  • It can be combined with petrol in any concentration up to pure ethanol (E100) and lead to different blends.


  • Reduce oil imports:
    • It helps in reducing dependence on oil imports, at the same time keeping a check on the import bill by saving precious foreign currency.
  • Environment friendly
    • As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions.
    • Since ethanol is produced from plants that harness the power of the sun, it is also considered a renewable fuel.
  • Engine Friendly
    • With a high octane rating, ethanol is a high performance fuel on the market and keeps today’s high-compression engines running smoothly.
    • Ethanol-blended fuel keeps the fuel system clean for optimal performance because it does not leave gummy deposits.
    • It helps prevent wintertime problems by acting as a gas-line antifreeze.


India and Ethanol

  • In India, ethanol is mainly produced from sugarcane molasses by fermentation process.
  • Ethanol Blended Petrol (EBP) programme was launched in January, 2003. The programme sought to promote the use of alternative and environment friendly fuels and to reduce import dependency for energy requirements.

Current status

  • India is set to close in on the highest ever of 7.2 per cent of ethanol blending with petrol in the current season (December 2018 – November 2019).
  • The current consumption of fuel sets 3300 million litres of ethanol requirement to achieve 10 per cent of blending target by 2022 for the entire country excluding J&K, North Eastern States and island territories.
  • For the current season itself i.e. 2018-19, however, sugar mills in India have contracted for supply of 2370 million litres which works out to 7.2 per cent of the petrol consumption in India.
  • Average all India ethanol blending with petrol achieved last year in 2017-18 was 4.22 per cent.


  • As the major source for production of bio-ethanol in India is from molasses, a by-product of sugarcane. The availability is hence dependent on the cane and sugar production that are cyclical in nature.
  • Ethanol has many other alternative uses such as potable alcohol and use in chemical and pharmaceutical industry. Hence its use as a fuel faces stiff competition from such uses.



  • The current policy on Biofuels is the National Policy on Biofuel (2018)
  • The policy is in sync with its target of employment generation, waste to wealth creation, doubling of farmer’s income, import reduction



Expansion of source

  • The Policy expands the bracket of variety of raw materials which can be used for production of ethanol. Till now only ethanol produced from sugarcane was allowed. The policy now includes damaged food grains( ike wheat, broken rice, rotten potatoes etc, which are unfit for human consumption), Sweet Sorghum, Cassava, Corn, Sugar Beet
  • With the approval of National Biofuel Coordination Committee the policy allows use of Surplus food grains for production of ethanol.
  • Supply chain mechanisms will also be set up, which comes from biodiesel production from non-edible oilseeds, used cooking oil and short gestation crops.


  • It categorises biofuels into 3 ‘Basic Biofuels’ so that appropriate financial and fiscal incentives can be provided
  • First Generation (1G) bio-ethanol & bio-diesel and Advanced Biofuels.
  • Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels
  • Third Generation (3G) biofuels, bio-CNG etc.

Viabiility Gap Funding

  • It proposes a “viability gap funding scheme” for 2G ethanol Bio refineries.
  • This includes Rs.5000 crore in 6 years for generation of Advanced Biofuels.
  • Additional tax incentives and higher purchase price as compared to 1G biofuels will be provided for 2G ethanol generation.


Importance of the policy

  • Used cooking oil is a potential feedstock for production of biodiesel so its use will prevent diversion of used cooking oil in the food industry. Used cooking oil is used in food industries which lead to serious diseases like heart blockage etc.

Rural Development

  • Agricultural residues/wastes which otherwise are burnt by the farmers can be converted to ethanol by adopting 2G technologies and if a market is developed it can fetch a very good price.
  • As Oil Marketing Companies are in the process of setting up twelve 2G bio refineries ,this will lead to overall infrastructural investment in the rural areas which in turn will lead to rural development.
  • The bio refineries will generate jobs in Village Level Entrepreneurs, Supply Chain Management and Plant Operations.

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