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SUSTAINABILITY OF ETHANOL BLENDING PROGRAMME IN
INDIA
ABINASH VERMA
DIRECTOR GENERAL
INDIAN SUGAR MILLS ASSOCIATION, NEW DELHI
POINTS OF DISCUSSION TODAY
1. General Overview: Benefits of EBP Programme
2. Policy Initiatives on EBP taken by Indian Government
3. Domestic Availability of Ethanol
4. Cyclicality of Sugar Production in India
5. Sustainability of the Programme
• Pricing of the Product
• Incentives by Government
BENEFITS (1/1)
• Boost to rural/ sugarcane economy
• Reduced dependence on fossil fuel
• Reduction in import bill of crude oil
• Curb on vehicular pollution, reduction in GHG gases
• Good oxygenate
• Control cyclicality of sugar production in India
POLICY INITIATIVES TAKEN BY GOVERNMENT OF INDIA (2/1)
• EBP introduced with the objective of benefittingcane farmers
• Programme first initiated in 2002 in sugar producingStates only
• Rates finalised through tenders with a cap fixed byOMCs
MANDATORY BLENDING DECISION (2/2)
• Decision taken in October 2006 for 5% mandatoryblending
• All over the country, except Jammu &Kashmir, North Eastern States and IslandTerritories
• Uniform procurement price fixed at Rs.21.50 perlitre ex-factory for 3 years
• OMCs procured ethanol through tenders withceiling price of Rs.21.50 per litre
• Supply defaults due to higher price for alcoholand down cycle of sugarcane production andmolasses availability
INITIAL PROBLEMS FACED (2/3)
• Some States imposed import/export duties onethanol
• Restrictions/controls on inter-State movementof ethanol
• Tedious procedures for sale and movement
• Annual permissions required by distilleries insome States for making ethanol
• Could not be implemented in some Statesearlier
PRESENT STATUS OF PROGRAMME(2/4)
• Mandatory Blending of 5% ethanol with petrol
• Procurement price of Rs.27 per litre ex-factory(fixed by Government provisionally)
• Committee under Member, Planning Commissionset up in July 2010 to recommend final price ofethanol
• Procurement of ethanol from indigenous sources
• Flexibility in implementation of the programmewith upto 10% blend in some States
• Duties/taxes on inter-State movement of ethanollargely resolved
PRESENT STATUS OF PROGRAMME (2/5)
• Requirement of 1000 million litres of ethanol for13 months (Sept ‘10 to Sept ‘11) byOMCs, annually of about 920 mn litres
• Contracts for about 700 million underfinalisation, supplies begun in October 2010
• Standards for 10% blending fixed by Governmentin April 2009
• Comprehensive trials by Oil sector indicated thatvehicles on road can operate at 10% blendwithout encountering any problems
DOMESTIC AVAILABILITY OF ETHANOL (3/1)
• Molasses is the primary feedstock for ethanol in India
• Installed capacity of 3500 million litres for production of alcohol and of 1500 million litres of fuel ethanol production
• Moving average of last 5 years molasses production isaround 8 million tonnes, equivalent to around 2000million litres, sufficient to meet 5% EBP programme
• Even in lean years, the availability of fuel ethanol isabout 1100 million litres, after meeting therequirement of potable industry at 900 million litres
Production of Molasses by the Sugar Industry (3/2)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Mill
ion
Mt
Molasses 5 yrs Moving Avg
AVAILABILITY OF ETHANOL FROM SUGAR INDUSTRY (3/3)
Lean Year Normal Year Projected 2010-11
Sugar Produced 18.8 mn tons 24 mn tons 25.5 mn tons
Molasses Production @ 4.5% 8.2 mn tons 10.8 mn tons 11.4 mn tons
Molasses available for
distillation
7.8 mn tons 9.6 mn tons 10.8 mn tons
Potential Alcohol Production 1950 mn litres 2400 mn litres 2700 mn litres
Alcohol for Potable Purposes 900 mn litres 900 mn litres 945 mn litres
Balance for Fuel Ethanol and
others
* In addition to above, about 350
mn litres of alcohol is produced
by khandsari manufacturers
and from grains
*1050 mn litres 1500 mn litres 1755 mn litres
CYCLICALITY OF SUGAR PRODUCTION IN INDIA (4/1)
• 5 year sugar cycle of 2-3 years of good production of sugarcane followed by 2-3 years of low production
• Diversion of cane by alternate sweetnermanufacturers, in the range of 15 to 30%
• Ratoon of just about 1 year
• Price and timely payment to cane farmers
• Returns from alternate crops
Improved Agriculture Extension Services = More T/Ha
Sugarcane: Acreage In India
In Million Hectares
Source: ISMA
0
1
2
3
4
5
6
99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-0707-08
08-0909-10
4.22 4.31 4.41 4.59
3.93
3.66
4.2
5.155.05
4.394.2
Large Variations in Sugar Production
Sugar: Production
In Million Tons
Source: ISMA
12.86
15.54
18.2 18.51 18.53
20.14
1412.69
19.67
28.32
26.33
14.6
18.9
25.5
0
5
10
15
20
25
30
97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 (E)
Present Molasses Produced Is Adequate For E 5 Programme
Molasses Availability
Source: ISMA
In Million Tons
0
2
4
6
8
10
12
14
99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10
8.02 7.82 8.068.87
5.95.51
8.55
13.1
11.31
6.5
8.4
SUSTAINABILITY OF THE ETHANOL BLENDING
PROGRAMME IN INDIA:
“THE WAY FORWARD”
4 PRONGED STRATEGY (5/1)
• Control cyclicality of sugarcane production
• Assured continuous demand for ethanol
• Ensure competitive pricing for ethanol
• Appropriate and adequate policy initiatives/ subsidies by Government
CONTROL SUGARCANE CYCLICALITY (5/2)
• Need to have adequate molasses and sugarcane juice for continuous supply of ethanol
• Direct conversion of surplus sugarcane intoethanol
• Improve farmers’ income– Inter-cropping– Yield increase– Ratoon
• Diversion of cane to alternate sweetnermanufacturers
• Long term relationships with farmers
There Is Enough Scope To Improve Yield To At Least 90 Tons Per Ha
Sugarcane: Yield (5/3)
Source: ISMA
The present All India cane yield per hectare ~ 62 Tons
In Tons per Hectare
52
54
56
58
60
62
64
66
68
70
72
99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10
70.9
68.667.4
63.6
59.4
64.8
66.9
69 68.9
64.566.1
DIRECT CONVERSION OF SUGARCANE TO ETHANOL (5/4)
Decided by the Government in December 2006
Direct conversion of cane juice to ethanol bysugar mills permitted
Surplus sugarcane can be diverted to ethanol inyears of surplus sugar and consequent depressedprices
For this to happen, the ex-factory price of ethanolshould be around one and a half times the priceof sugar
ETHANOL PETROL
Component Rs./Litre Component Rs./ Litre
Ethanol Price inclusive
of denaturant cost
27.0 Depot Price of Petrol* 40.67
Dealer Commission 1.27
Excise Duty 10.3% 2.78 State Tax (ex) 9.76
Sales Tax on Ethanol 1.30
Transportation Cost 1.10
Total 32.18
Depot Price of Petrol 40.67* Price of Petrol 51.70
Profit to OMCs
On cost to cost basis
OMCs paying capacity
of ethanol.
8.49
34.00
Basis for fixing ethanol price (5/5)
• Parity of issue price of gasoline
BASIS FOR FIXING ETHANOL PRICE –II (5/6)
• Import parity price of Ethanol
FOB Price of Hydrous Ethanol US$ m3 600
Freight from Brazil to India US$ m3 50
CNF Price Western India Port US$ m3 650
Exchange Rate INR/USD 44.6
CNF Price Rs./Litre 28.99
Import Duty @ 7.5% Rs./Litre 2.17
Landed Price Rs./Litre 31.16
Port Handling, Clearing & 30 days storage Rs./Litre 1.50
Dehydration Cost from Hydrous to Fuel Grade Rs./Litre 4.00
Delivered Cost Fuel Grade Ethanol Rs./Litre 36.66
INCENTIVISE RENEWABLE ENERGY (5/7)
• Renewable energy is being incentivised all over the world
• Preferential tariff structure available for renewable energy
• US and Brazil, the two largest producers and users of fuel ethanol, follow this principle
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