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Ethanol Blending Programme (EBP) in India

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Ethanol blending is the practice of blending petrol with ethanol. Many countries, including India, have adopted ethanol blending in petrol in order to reduce vehicle exhaust emissions and also to reduce the import burden on account of crude petroleum from which petrol is produced. It is estimated that a 5% blending (105 crore litres) can result in replacement of around 1.8 million Barrels of crude oil . The renewable ethanol content, which is a by product of the sugar industry, is expected to result in a net reduction in the emission of carbon dioxide, carbon monoxide (CO) and hydrocarbons (HC). Ethanol itself burns cleaner and burns more completely than petrol it is blended into. In India, ethanol is mainly derived by sugarcane molasses, which is a by-product in the conversion of sugar cane juice to sugar.

The practice of blending ethanol started in India in 2001. Government of India mandated blending of 5% ethanol with petrol in 9 States and 4 Union Territories in the year 2003 and subsequently mandated 5% blending of ethanol with petrol on an all-India basis in November 2006 (in 20 States and 8 Union Territories except a few North East states and Jammu & Kashmir). This was also an attempt to reduce the Under-recovery of Public Sector Oil Marketing Companies (OMCs). Ministry of Petroleum and Natural Gas, on 1 September, 2015, inter-alia has asked OMCs to target ten percent blending of ethanol in Petrol in as many States as possible. In countries like US, blending is allowed upto 10%. Subsequent to Brazil's bio-fuel programme, which began in 1976, close to 94% of cars sold in Brazil are flexible fuel cars that can handle ethanol blends from 18 per cent upward .

Ethanol blending first found mention in the Auto fuel policy of 2003. It suggested developing technologies for producing ethanol/ bio fuels from renewable energy sources and introducing vehicles to utilise these bio fuels. Later, as per National Policy on Bio-fuels, announced in December 2009, oil companies were required to sell petrol blended with at least 5% of ethanol. It proposed that the blending level be increased to 20% by 2017.

Ethanol, being a by product of the sugar industry, was expected to be freely available. However, Oil marketing companies (OMCs) were not even able to get bids for more than 50% of the amount offered for purchase . Further, the Government decided on 22.11.2012 that procurement price of ethanol will henceforth be decided between Oil Marketing Companies (OMCs) and suppliers of ethanol. In addition, on 03.07.2013, it was decided that ethanol would be procured only from domestic sources. This led to a rise in ethanol prices, which to a great extent reportedly eroded the economy of the blend. At present, government has permitted OMCs to implement the ethanol blending programme in notified 20 States and 4 Union Territories as per the availability of ethanol.

There are reportedly significant transaction barriers which impede smooth supplies of ethanol for blending. In several States, State not only imposes levy on molasses but also regulates the movement of non levy molasses. Inter-state movement of ethanol requires No-Objection-Certificates (NOCs) from the State Excise Authorities along with permits from dispatching and receiving States. Most States impose “Export/Import” duties on ethanol leaving and entering their boundaries. There are some instances where Octroi is levied on ethanol for entry into municipal limits. Hence States were requested by the Central Government to liberalise restrictions on the supply of ethanol so that its blending with petrol can be encouraged while improving the financial health of sugar sector and also liquidation of cane dues of farmers.

As per the estimates given in Auto Fuel Vision and Policy 2025 issued in May 2014, blended petrol is available only in 13 states and the average blend is 2%. During the sugar year 2014-15, OMCs have achieved a blending percentage of 2.3% as per the press release dated 25 April 2016.

Hence, in order to improve the availability of ethanol, the Government, on December 10, 2014, fixed the price of Ethanol in the Range of Rs. 48.50 to Rs. 49.50, depending upon the distance of distillery from the depot/installation of the OMCs. (The rates are inclusive of all central and statutory levies, transportation cost etc, which would be borne by the Ethanol suppliers). Fixation of ethanol price based on distance, has encouraged movement of ethanol to longer distances, including States having lack of distilleries. Further, ethanol produced from other non-food feedstocks besides molasses, like cellulosic and ligno cellulosic materials including petrochemical route, has also been allowed to be procured subject to meeting the relevant Bureau of Indian Standards (BIS) specifications.

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